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

 

OceanaGold: Man Killed In Waihi Mine Accident

A 29-year-old man had died following a work place accident at OceanaGold mine, Waihi last night. The man was killed after the front end loader he was in rolled down a slope. The accident happened at approximately 6.30pm on Thursday night. More>>

ALSO:

Constructing Consent: Annual Housing Consents Highest In Over A Decade

More than 29,000 new homes gained building consent in the year to June 2016, up 16 percent from the previous June year, Statistics New Zealand said today. More>>

ALSO:

War Against Weevil For Future Peas: “No Peas, No Weevil” Ban Now In Place In Wairarapa

The Ministry for Primary Industries (MPI) has today placed a ban on growing peas within a specified area and placed controls on moving pea material (seed and untreated pea straw) within, in and out of this area for the next 2 years. More>>

ALSO:

Wood Producers: Crisis In New Zealand Log Supply

New Zealand wood processing leaders held a hui with senior government officials and political leaders in Whangarei yesterday to assess the acute log supply shortage to local mills in Northland. More>>

Consents And Taxes: Trustpower 'Very Disappointed' With Judgement

Trustpower is "very disappointed" with a Supreme Court ruling dismissing its bid to claim tax deductions on $17.7 million of project costs in a case closely watched by large-scale infrastructure developers. More>>

ALSO:

Fruitful Endeavours: Kiwifruit Exports Reach Record Levels

In June 2016, kiwifruit exports rose $105 million (47 percent) from June 2015 to reach $331 million, Statistics New Zealand said today. Overall, goods exports rose $109 million (2.6 percent) in June 2016 (to $4.3 billion). More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news