The vast majority of Tower customers are in line for a discount on a portion of their home insurance premiums, following the introduction of a new pricing model for flood risks.
A car submerged in floodwaters in Westport in July. Tower Insurance paid out $85m in claims for the Westland floods. Photo: Supplied / NZ Defence Force
The company teamed up with global catastrophe risk solutions company Risk Management Solutions (RMS) to develop the model which will give Tower's customers a low, medium or high flood risk rating for their home, as well as an estimated cost of replacing or repairing damage caused by flooding.
It would also be available to people with home policies with other companies to assess their risk to floods.
Tower said the new tool would mean that nearly 90 percent of its customers would receive a reduction in the flood risk portion of their premium, at an average of $25 each.
"About 10 percent of customers will experience an increase in this portion of their premiums, with the majority of these being less that $50 per year," it said.
The company said a report from Lloyds of London showed New Zealand is the second riskiest country in the world for natural disasters, which should be reflected in premiums.
In the past 18 months, the company had paid out $388 million in natural disaster claims.
Graphic: Supplied / Tower Insurance
Tower chief executive Blair Turnbull said it is sharing the flood risk ratings with all New Zealanders, so they can better understand their premiums and make informed decisions when insuring their homes.
"The launch of this model is aligned with Tower's commitment to a sustainable future and being more open and transparent around insurance and risks associated with climate change."
"We believe that risk-based pricing is a fairer way to structure insurance to ensure that customers don't pay for risks they don't have."
Turnbull hoped the tool would encourage more consumers to consider switching to Tower for their home insurance policies.
The model is built with 5 million data points obtained from the National Institute of Atmospheric Research, Land Information New Zealand, as well as local and regional councils, and the Insurance Council of New Zealand.
"The benefit of using the RMS model is that it is so detailed that neighbouring properties can have very different ratings, depending on the camber of their land, whether they have a flood wall, and other factors."
Turnbull said the company had been sharing the model with local councils and government to discourage construction on flood prone areas and wetlands.
