Understanding how premiums are calculated
Our general insurance policies are underwritten by IAG New Zealand Limited (IAG). To ensure customers pay a fair price for insurance cover, IAG regularly reviews its pricing each year to account for any changes to the cost of providing cover.
Your premiums (the amount you pay for your policy) go towards the cost of replacing and repairing your property and belongings should something happen, and IAG (the insurer) is committed to being there for you when you most need them. This means your insurance premium can change from time to time. Premiums for home and contents insurance are made up of different elements, and only part of your premium goes toward IAG. Your premium also includes costs like government taxes, levies, and reinsurance.
This video (from the insurer IAG) explains factors that may affect your PremierCare premiums.
Company premium
This is what you pay to IAG for the cost of your cover. IAG use this money to pay for claims and other expenses to keep the company running. IAG calculate their premiums based on risk, which means customers who live in areas at lower risk of natural disasters could pay less than those who live in higher risk areas.
Premiums are affected by your choice of excess, any large or valuable purchases you add to your policy, changes in sum insured, or changes in circumstance.
Your premiums are also affected by how many claims you’ve made and the cost of those claims. IAG also needs to take into account the rising cost of labour and materials IAG pays to settle claims made. These overall costs, before the addition of any optional extensions, levies and GST is called your ‘company premium’. You can find this in the premium breakdown on your BNZ PremierCare renewal letter.
Reinsurance
Everyone needs insurance – even insurance companies. Reinsurance is protection for insurance companies. It provides specialist insurance to help cover the cost of claims if there’s a major disaster, like an earthquake or flood.
Business costs
Inflation affects everything, including insurance premiums. For example, more people are carrying personal electronic devices every year, so contents claims for these items have increased significantly. Rising costs include more technologically advanced cars that need more expensive parts, and the increasing cost of building materials that impact the cost to rebuild.
Tax
Goods and services tax (GST)
GST is a charge that is applied to insurance premiums and paid to the Government. GST is charged at 15% of the total amount owing so any increases to your insurance premium, including any levies charged, means you’ll also be paying more GST.
Levies
Levies are charges that are applied to insurance premiums and paid to the Government. They help cover the cost of services that benefit everyone.
Natural Hazards Insurance (NHI) levy
The Natural Hazards Insurance levy replaces the Earthquake Commission (EQC) levy.
The Natural Hazards Commission Toka Tū Ake is a New Zealand Crown entity (government agency). It provides insurance, called Natural Hazards Cover (NHCover). This provides cover for damage caused by earthquakes, landslides, volcanic activity, hydrothermal activity and tsunamis. It’s for residential homes and some areas of residential land if you have a current insurance policy covering your home, like PremierCare Insurance (PDF 2.1MB).
To pay for NHCover, the Government sets the Natural Hazards Insurance levy. Insurance companies like IAG collect this levy as part of your premiums on behalf of the Natural Hazards Commission Toka Tū Ake.
You may see terms like Earthquake Commission, EQC or EQCover used in your insurance documents after 1 July 2024. This does not affect your cover for natural hazards.
Fire and Emergency (FENZ) levy
FENZ is an integrated fire and emergency service organisation under which urban and rural fire services are combined. It is mainly funded by levies collected on property insurance. Insurance companies like IAG collect these levies as part of your premiums on behalf of FENZ, who set the amount that is collected. Find out more about the Fire and Emergency Levy
Get in touch
If you’d like to talk to the PremierCare team about what makes up your premium, call 0800 808 618.