Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Massive Rate of Home Under Insurance Suggests Confusion

Massive Rate of Home Under Insurance Suggests Consumer Confusion


Emerging consumer data confirms what those in the construction cost field have been warning – that the majority of insured homeowners do not have sufficient cover for full rebuild in the event of disaster. Consumer NZ’s latest report has verified that two-thirds of Kiwi homeowners are underinsured as a result of changes to home insurance guidelines that, among other things, require owners to specify a rebuild sum for which their property is insured.

In November 2013, Construction Cost Consultants became the first organization to raise the alarm over the vulnerability of homeowners in the wake of the new guidelines’ introduction, noting that at the time around 93% of people were opting for the default sum provided by their insurer and that the consequent rate of underinsurance could be estimated as $167 billion (at minimum) of a total housing value of more than $717 billion.

Though the rate of people insuring for the default sum has dropped since late last year, the risk shared by homeowners, banks and insurers remains high.

Banks and insurers have themselves acknowledged this risk, and CCC founder and CEO Andy Thomson reports that the major companies CCC deals with have declared their intentions to increase the base rates on which default sums are calculated.

However, this is not resulting in widespread change to consumer behaviour. Mr Thomson says CCC’s experience is that even when homeowners are warned their cover is too low, they are not increasing the sum insured for their property, apparently not trusting the data supplied. Another possible impediment, Mr Thomson notes, is the onslaught of new terminology (rebuild estimate, gross floor area, construction inflation) which may be confusing to many.

In a bid to extend the spread of sum insured accuracy across the New Zealand market, CCC is developing relationships with banks and insurers and lobbying government and other interest groups to bring regulation to the quantity surveying sector. Quantity surveyors are trained extensively in the measurement and costing of materials and products. At present, there is no regulation to prevent insufficiently skilled, dishonest operators producing rebuild reports that are incomplete and contain inaccurate figures for insurance.

Mr Thomson says that as financial services providers change their calculations to reduce the risk of underinsurance, the “cowboy” operators are the next big risk the industry needs to manage, and a degree of regulation should be introduced comparable to legislation of financial services companies and advisers following the finance company sector collapse.

Emerging consumer data confirms what those in the construction cost field have been warning – that the majority of insured homeowners do not have sufficient cover for full rebuild in the event of disaster. Consumer NZ’s latest report has verified that two-thirds of Kiwi homeowners are underinsured as a result of changes to home insurance guidelines that, among other things, require owners to specify a rebuild sum for which their property is insured.

In November 2013, Construction Cost Consultants became the first organization to raise the alarm over the vulnerability of homeowners in the wake of the new guidelines’ introduction, noting that at the time around 93% of people were opting for the default sum provided by their insurer and that the consequent rate of underinsurance could be estimated as $167 billion (at minimum) of a total housing value of more than $717 billion.

Though the rate of people insuring for the default sum has dropped since late last year, the risk shared by homeowners, banks and insurers remains high.

Banks and insurers have themselves acknowledged this risk, and CCC founder and CEO Andy Thomson reports that the major companies CCC deals with have declared their intentions to increase the base rates on which default sums are calculated.

However, this is not resulting in widespread change to consumer behaviour. Mr Thomson says CCC’s experience is that even when homeowners are warned their cover is too low, they are not increasing the sum insured for their property, apparently not trusting the data supplied. Another possible impediment, Mr Thomson notes, is the onslaught of new terminology (rebuild estimate, gross floor area, construction inflation) which may be confusing to many.

In a bid to extend the spread of sum insured accuracy across the New Zealand market, CCC is developing relationships with banks and insurers and lobbying government and other interest groups to bring regulation to the quantity surveying sector. Quantity surveyors are trained extensively in the measurement and costing of materials and products. At present, there is no regulation to prevent insufficiently skilled, dishonest operators producing rebuild reports that are incomplete and contain inaccurate figures for insurance.

Mr Thomson says that as financial services providers change their calculations to reduce the risk of underinsurance, the “cowboy” operators are the next big risk the industry needs to manage, and a degree of regulation should be introduced comparable to legislation of financial services companies and advisers following the finance company sector collapse.

Emerging consumer data confirms what those in the construction cost field have been warning – that the majority of insured homeowners do not have sufficient cover for full rebuild in the event of disaster. Consumer NZ’s latest report has verified that two-thirds of Kiwi homeowners are underinsured as a result of changes to home insurance guidelines that, among other things, require owners to specify a rebuild sum for which their property is insured.

In November 2013, Construction Cost Consultants became the first organization to raise the alarm over the vulnerability of homeowners in the wake of the new guidelines’ introduction, noting that at the time around 93% of people were opting for the default sum provided by their insurer and that the consequent rate of underinsurance could be estimated as $167 billion (at minimum) of a total housing value of more than $717 billion.

Though the rate of people insuring for the default sum has dropped since late last year, the risk shared by homeowners, banks and insurers remains high.

Banks and insurers have themselves acknowledged this risk, and CCC founder and CEO Andy Thomson reports that the major companies CCC deals with have declared their intentions to increase the base rates on which default sums are calculated.

However, this is not resulting in widespread change to consumer behaviour. Mr Thomson says CCC’s experience is that even when homeowners are warned their cover is too low, they are not increasing the sum insured for their property,
apparently not trusting the data supplied. Another possible impediment, Mr Thomson notes, is the onslaught of new terminology (rebuild estimate, gross floor area, construction inflation) which may be confusing to many.

In a bid to extend the spread of sum insured accuracy across the New Zealand market, CCC is developing relationships with banks and insurers and lobbying
government and other interest groups to bring regulation to the quantity surveying sector. Quantity surveyors are trained extensively in the measurement and costing of materials and products. At present, there is no regulation to prevent insufficiently skilled, dishonest operators producing rebuild reports that are incomplete and contain inaccurate figures for insurance.

Mr Thomson says that as financial services providers change their calculations to reduce the risk of underinsurance, the “cowboy” operators are the next big risk the industry needs to manage, and a degree of regulation should be introduced comparable to legislation of financial services companies and advisers following the finance company sector collapse.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news