New Zealand’s government has begun a six‑month review of the residential insurance market as home cover becomes more expensive and, in some areas, more difficult to obtain. The decision follows Treasury analysis indicating that home insurance premiums have risen about 40% over the past two years and have increased at around three times the rate of general inflation since 2011.
Finance Minister Nicola Willis has asked the Council of Financial Regulators (CoFR) to lead a detailed examination of pricing and affordability. CoFR brings together the Reserve Bank of New Zealand (RBNZ), the Commerce Commission, the Financial Markets Authority (FMA), and relevant government agencies. “We are not only worried about that affordability, but we don’t want to see people dropping their insurance policies,” Willis said, as reported by 1News.
Willis said Cabinet had instructed regulators to work with insurers to analyse recent price movements and their effects on households. “We as a Cabinet have directed the Council of Financial Regulators, which is the Reserve Bank, the Commerce Commission, the Financial Markets Authority, along with government agencies, to work with the insurance sector to deep dive into those questions over the next six months,” Willis said. The review will examine the drivers of premium increases, how households are adjusting their cover, and which policy or regulatory settings may be influencing costs. It will include competition conditions, construction and repair cost trends, reinsurance pricing, and the sector’s move toward more granular, risk‑based pricing for events such as floods and earthquakes.
The Cabinet paper supporting the review notes “some evidence of higher profit margins for insurers in New Zealand compared with Australia” and says the causes are not yet clear. It points to New Zealand’s natural hazard exposure as one possible factor, with investors seeking returns that reflect higher risk, while also raising questions about the strength of competitive pressure. New Zealand’s household insurance market is characterised as highly concentrated, with three insurers controlling a large share of the segment. Initial Treasury work suggests “there may be competition issues in the insurance sector,” although officials say the available data set is limited.
Willis said the government wants a clearer picture of which elements of pricing are driven by global capital and physical risk and which are affected by domestic rules. She said she wants to separate the impact of climate and earthquake risk from that of “regulatory burden” and “red tape that we put on insurance companies.” She added: “I think most New Zealanders will understand this isn’t going to be a quick fix issue. This isn’t a simple Band‑Aid solution. But if there are small things we can do at the margin which will reduce the pressure on your insurance bill, we want to do it.”
While insurers continue to write home policies in most regions, officials and consumer advocates are tracking signs of constrained capacity in higher‑risk zones. Areas exposed to both earthquake and flood risk, including Wellington, Marlborough, and Canterbury, have been highlighted as locations where access to cover is becoming more challenging. Concerns intensified when AA Insurance temporarily paused new home insurance policies in Westport, citing flood risk. Although that move applied to a single firm and town, it drew industry attention as an example of how hazard assessments, climate exposure, and capital considerations can shape underwriting decisions and future availability.
Kris Faafoi, Insurance Council of New Zealand (ICNZ) chief executive, described the pause as “one business decision from one insurer” rather than a sector‑wide withdrawal, but said climate‑related risk remains a key factor for pricing and capacity. “We’ve said for a long time the likes of climate risk, increased risk of flooding events, is going to have an impact on premiums if nothing is done to reduce that risk,” Faafoi said, as reported by 1News.
The review aligns with concerns set out in a Consumer NZ report released in August 2025 on the long‑term affordability of home insurance. Using Stats NZ data, the report notes that house insurance premiums have risen 916% since 2000. Survey data cited in the report indicates that cost is already prompting some households to forego cover. Around 7% of surveyed households reported dropping insurance because of price in 2022, rising to 17% by 2025. Insurance now sits among the four largest financial pressures for New Zealanders, alongside housing, food, and household debt.
Read next: Can Kiwis keep home insurance beyond 2035?
Consumer NZ also reports low trust in insurers. Respondents commonly referred to slow claims processing, settlement delays, and limited visibility over how premiums are set. Risk‑based pricing is identified as a particular tension point, with many policyholders unable to access or test the hazard and vulnerability data used in pricing decisions. The report says limited ability to compare products online, especially for higher‑risk properties, further constrains consumer choice. It also notes that insurers’ profits have recovered despite large recent weather‑related payouts and that major trans‑Tasman groups appear to earn higher margins in New Zealand than in Australia.
ICNZ has said it will engage with the government’s work while underlining that statutory charges and inflation are material inputs into premium levels. Faafoi said the sector would cooperate with CoFR and the relevant agencies throughout the review period. “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 said a substantial share of many home premiums reflects government‑mandated taxes and levies rather than insurer earnings. “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. He cited construction‑related inflation, which lifts repair and rebuild costs, and regulatory compliance costs as additional pressures on pricing. He said Willis had indicated to him that the exercise “was not a big stick” intervention.
Separately, Willis has paused a review of levy settings under the Natural Hazards Insurance Act. Treasury had recommended increasing the Natural Hazards Commission (NHC) 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. Consideration of those settings will resume once the broader affordability and competition review is completed. For insurers, reinsurers, and intermediaries, the process is expected to clarify the relative contribution of risk trends, reinsurance costs, taxation, and regulation to premium outcomes and to inform how coverage is maintained across New Zealand’s residential portfolio.
