Why Homeowners should care

Picture this: You own a $1 million house in Petone, Wellington. Just 10cm of additional sea-level rise could turn a one-in-100-year flooding event into a one-in-20-year occurrence. Even worse, one climate economist projected that annual insurance premiums for a property like this could skyrocket from $1,500 to an eye-watering $100,000 within two decades as insurers grapple with increasing climate risks.

This isn’t just a Wellington problem. Across New Zealand, climate risks are shifting the rules:

• Coastal regions like Auckland’s North Shore face increasing storm surges.

• Flood-prone areas like Hawke’s Bay and Canterbury are experiencing more frequent inundations.

• Fire-prone zones in Otago and Marlborough are dealing with hotter, drier summers.

Understanding how climate risks impact your insurance can help you make smarter decisions. For more context, check out Why Are House Insurance Premiums Increasing to learn about the drivers of rising premiums.

How climate change is driving up costs

1. Regional premium disparities

The Quashed Quarterly Index highlights significant regional differences in insurance costs:

• House Insurance: Wellington leads with $4,467 yearly costs, followed by Canterbury at $2,655. Aucklanders enjoy the lowest rates at $2,104.

• Contents Insurance: Wellington again tops the chart at $1,054, far above Auckland’s $755.

• Car Insurance: Auckland residents pay $1,579, compared to $1,193 in Wellington.

But these averages don’t tell the whole story. Risk-based pricing is shaping premiums more than ever. Insurers like Tower assess location-specific natural hazards, construction materials, and property features to set premiums..

2. Rising premiums and shrinking options

The Premiums Under Pressure report by Kali Mercier and WSP highlights growing uninsurability risks for over 10,000 properties nationwide. Additional factors driving costs include:

• Natural disasters and claims: The frequency of disasters, such as Cyclone Gabrielle, increases claims, driving up costs.

• Reinsurance Costs: Rising global reinsurance premiums are passed down to homeowners.

• Government levies: Premiums also include levies for Fire and Emergency New Zealand and the Natural Hazards Commission.

Lessons from overseas

New Zealand isn’t alone in facing these challenges. Other countries are taking steps to address the rising costs of climate-driven insurance risks.

United States: Facing uninsurability and real estate shifts

In the U.S., states like California and Florida are grappling with soaring premiums driven by wildfires, hurricanes, and floods. In some areas, insurance has become so expensive that entire neighbourhoods are deemed uninsurable (California Department of Insurance, 2023).

A 2023 study by the Environmental Defense Fund estimated that flood-zone properties in the U.S. are overvalued by up to $237 billion, creating financial vulnerabilities for homeowners and the broader housing market.

Takeaways for NZ: New Zealand could adopt state-backed insurance programs for high-risk areas, similar to California’s state pools. Addressing overvaluation in flood-prone zones would also protect buyers from taking on unsustainable financial risks.

Europe: Subsidies and managed retreats

The UK’s Flood Re program subsidises premiums for properties in high-risk areas through a levy on insurers. While this provides temporary relief, critics argue it delays much-needed climate adaptations.

Meanwhile, the Netherlands’ “Room for the River” program takes a proactive approach by reallocating land for natural flooding, protecting communities while minimising long-term property damage.

Takeaways for NZ: Temporary subsidy programs could ease financial pressures on high-risk homeowners, but they must be paired with forward-thinking policies. Managed retreat strategies, as demonstrated in the Netherlands, offer valuable lessons for New Zealand’s coastal communities.

What should Homebuyers think about? 

For prospective buyers, choosing the right property now includes understanding climate risks and their impact on long-term affordability. Here are some critical considerations:

• Research risk zones: Use hazard maps from local councils to check if a property is in a floodplain, coastal erosion area, or high-risk earthquake zone.

• Get insurance quotes early: Knowing the potential premium costs for a property can help you budget more effectively. You can do this with Quashed.

• Future-proof your investment: Consider properties built with resilience in mind, such as elevated structures or homes using flood-resistant materials.

• Think long term: A property that is affordable today could face large premiums—or become uninsurable—within a few decades as risks increase

Struggling to manage rising house insurance premiums? Check out our blog for practical ways to save without compromising your cover.

What can existing homeowners do?

For those already living in high-risk areas, there are practical steps to mitigate costs and protect their homes:

• Keep your insurance up-to-date: Double-check that your sum insured matches what it would cost to rebuild your home. Regular reviews can prevent nasty surprises if disaster strikes.

• Make your home resilient: Small upgrades can go a long way in protecting your property - Add flood barriers or raise appliances if you live in a flood-prone area, Use fire-resistant materials and keep flammable vegetation away from your home choose water-permeable paving to help reduce runoff during heavy rain.

• Know the risks in your area: Keep tabs on hazard maps and local updates to understand how risks might change where you live.

• Push for bigger changes: Support better land-use planning and investment in infrastructure that can help everyone handle climate risks more effectively.

Looking for a simple breakdown of house insurance in New Zealand? Check out House Insurance: A Homeowner’s Guide — it’s packed with tips on saving money, understanding your policy, and making sure you’ve got the right cover for your home.

How Quashed can help

We know dealing with climate risks and rising insurance costs isn’t easy—but that’s why we’re here. Quashed makes insurance simple and transparent for Kiwi homeowners. With Quashed, you can:

• Easily compare real-time quotes from multiple providers in one place to find the best fit for your home and budget.

• Save money by exploring options like adjusting your excess or sum insured.

• Help you review and analyse your existing policy to ensure it’s fit for purpose.

Join over 45,000 Kiwis who are already using Quashed to make smarter insurance decisions today.

Further reading

Explore more helpful resources from Quashed on house insurance:

8 Budget Hacks for House Insurance:Practical tips to save on premiums.

Rethinking Insurance for First-Time Home Buyers: Tips for new homeowners navigating insurance.

10 Insurance Mistakes That Cost You Money: Avoid common pitfalls and make smarter choices.