Consumer NZ is putting the spotlight on household affordability and competition issues as the government begins a wide‑ranging review of the home insurance market, including how natural hazard risk, reinsurance, and tax settings are feeding into premiums.
Consumer NZ questions market structure and outcomes
Consumer NZ chief executive Jon Duffy said he expects the Commerce Commission’s initial work on insurance to reveal themes similar to past market studies. “I’d be surprised if the Commerce Commission did not conclude that there were the same issues in insurance as were seen in the banking sector and the supermarket sector. It’s likely that a broader market study would be justified,” Duffy said, as reported by RNZ. He said the interaction of risk‑based pricing, premium increases, and market concentration is having a particular impact in higher‑risk regions, including Wellington and parts of the South Island. “Wellington is the most expensive place in the country to live. We live on multiple fault lines, we live close to the sea… increasingly it’s becoming too difficult for people, especially apartment dwellers in Wellington to afford what is the basic of living in a first world economy. You need to be able to insure your property,” he said.
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Duffy pointed to the dominance of two trans‑Tasman groups – IAG and Suncorp – in the home insurance segment and said they “appear to be earning higher returns in New Zealand than they do in Australia.” An August 2025 Consumer NZ report on the long‑term affordability of home insurance, using Stats NZ data, found house insurance premiums have risen 916% since 2000. Survey results in the report indicated that cost is already shaping coverage decisions, with 7% of respondents in 2022 and 17% in 2025 reporting that they had cancelled insurance because of price. Respondents identified insurance as one of their four largest financial pressures, alongside housing, food, and household debt.
Regulators focus on pricing, risk, and competition
The review follows Cabinet’s decision to instruct the Council of Financial Regulators (CoFR) to carry out a focused assessment of household insurance affordability, alongside an initial market assessment by the Commerce Commission. In parallel, the government has paused work on levy changes under the Natural Hazards Insurance Act until the review is completed. In advice supporting the move, Treasury said home insurance premiums have increased at roughly three times the rate of the consumer price index since 2011, including a 40% rise over the past two years. Treasury noted larger increases in areas exposed to both seismic and flood risk and cautioned that cover could become unavailable for some properties as hazard models and capital requirements are updated.
Treasury also referred to evidence that general insurers’ profit margins appear higher in New Zealand than in Australia. It said New Zealand’s natural hazard profile is likely to be part of the explanation but added that this pattern “could also indicate weaker competitive pressures in New Zealand.” The first phase of the review is expected to take about six months and will be followed by policy development. For insurers and intermediaries, the process is expected to clarify the relative contribution of underlying risk trends, reinsurance costs, tax and levy settings, and regulatory requirements to recent premium movements and capacity decisions.
Links with banking and prudential risk raised
Duffy said the work programme should also consider the connection between insurance availability and mortgage lending, given that many home loans require insured collateral. “The banking sector needs to be made aware of this, because if suddenly insurance isn’t available on a whole lot of properties that have mortgages over them, and that means those mortgage holders could be in breach of their mortgage terms and conditions, what happens where those mortgage‑holders default? Or there is a natural disaster, and suddenly all of those mortgages can’t be called in. That’s a prudential risk for the banks, especially in an economy like New Zealand, where it has been a housing market with a small economy tacked on,” Duffy said. He said insurance affordability is linked to wider climate adaptation and housing policy settings, rather than being a stand‑alone pricing issue.
Economic indicators show sustained cost growth
Infometrics chief executive Brad Olsen said recent premium trends are consistent with New Zealand’s loss history and exposure profile, including events such as Cyclone Gabrielle. “Does anyone remember Cyclone Gabrielle a couple of years ago? Those increases are very much being driven in many regards by reinsurance costs and the risk factors New Zealand has,” Olsen said, as reported by RNZ. He said annual inflation in dwelling insurance peaked at 25% in the March 2024 quarter, while contents insurance inflation reached 28% in the same year, following an earlier peak in dwelling insurance inflation of 18% in 2018.
Olsen said the number of days during which parts of the country were under a state of emergency has risen 237% over the last 12 years compared with the previous 12 years, coinciding with a more frequent and costly claims environment. According to Olsen, total insurance spending has grown as a share of household budgets, from 1.7% of total household expenditure in 2006 to 3.16% in 2020. Over that period, a larger share of that spend has been directed toward dwelling cover, with a relative decline in products such as life insurance.
Industry cites taxes, levies and inflation pressures
The Insurance Council of New Zealand (ICNZ) has said it will participate in the review and has pointed to statutory charges and general inflation as key inputs into retail premiums. ICNZ chief executive Kris Faafoi said the sector intends to cooperate with CoFR and other agencies during the review. “We’ll work with the government to make sure that they can get the answers, because we want to make sure that insurance in the long term is accessible and affordable for all New Zealanders,” Faafoi said.
Faafoi added that a material share of many home premiums consists of government‑mandated taxes and levies rather than insurer margin. “People sitting at home might not realise that 40% of their home premium is taxes and levies. It’s things like that that are out of the control of the insurance sector that I think this review should look at. There are other things like inflation that hurts us too,” he said.
Faafoi cited construction‑related inflation and regulatory compliance obligations as additional drivers of costs. He said Finance Minister Nicola Willis had indicated to him that the review “was not a big stick” intervention. Insurance and Financial Services Ombudsman Karen Stevens has also said that around 40% of house premiums are government taxes and called for central and local government to coordinate “to ensure known risks are mitigated and New Zealand is more resilient in the face of climate change and increasing weather events.
Natural hazards levy settings deferred
In a related step, Willis has deferred decisions on levy settings under the Natural Hazards Insurance Act. Treasury had advised increasing the Natural Hazards Commission levy from 16 cents to 24 cents per $100 of building cover, which would have raised the maximum annual levy per dwelling from $554 to $828. Those settings will be reconsidered once the affordability and competition review is complete. Market participants expect the outcome to influence how risk and cost are shared among private insurers, reinsurers, the Crown scheme, and households across New Zealand’s residential portfolio.
Disclaimer: This information has been provided for interest and education purposes and may not reflect the views of RiskNZ.