7 Jul 2015

EQC changes 'will increase premiums'

6:59 am on 7 July 2015

Changes to the Earthquake Commission's cover will likely result in increased insurance premiums but it is too early to tell how big those increases might be, according to the Insurance Council.

Insurance Council chief executive Tim Grafton

Insurance Council chief executive Tim Grafton Photo: RNZ / Jonathan Mitchell

Canterbury Earthquake Recovery Minister Gerry Brownlee yesterday announced proposed changes to the Earthquake Commission Act.

They included doubling the amount the Earthquake Commission (EQC) paid out for disaster cover to $200,000 and private insurers handling claims on behalf of the commission.

The Insurance Council said changes to the commission's cover would likely result in increased insurance premiums, but it was too early to tell how big increases might be. Chief executive, Tim Grafton, said the changes would increase efficiency after natural disasters.

He said it made "perfect sense" for private insurers to pick up all contents claims because homeowners may go an entire lifetime without having any relationship with EQC, whereas most have a rapport with their insurer.

Mr Grafton said the EQC review could put "upward pressure" on premiums, but he did not expect the increases to be dramatic.

"We've got a lot of number crunching to do to see how it all shakes out."

The insurance industry was a "competitive market" and he said insurers would make their own decisions about premiums and cover.

Mr Grafton said insurers in New Zealand were required to hold reserves and capital to cover a 1-in-1000 year event, which he said was a much higher threshold than other countries.

Both private insurers and EQC had faced challenges in the wake of the Canterbury earthquakes, he said.

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