Survey shows insurance ignorance is rife | Stuff.co.nz

John Cocks, aka Cocksy the builder, will front IAG?s ad campaign.

Two-thirds of?homeowners are still not aware that home insurance is changing and that they will be responsible for calculating the cost of replacing their home.

Giant international reinsurers have required New Zealand insurers to stop offering traditional house replacement insurance, which guaranteed homes covered would be rebuilt regardless of the cost.

Instead, cover is now the "sum insured", though capped insurance might be more accurate. That is because the "sum insured" refers only to the highest payout the insurer will make in the case of your house having to be completely rebuilt.

Any replacement policies still in existence are being phased out this year.

But a survey by giant Aussie-owned insurer IAG, which operates the State, NZI and AMI insurance brands, suggests despite the best efforts of insurers to flag the changes, only 33 per cent of policyholders are aware of what is happening.

It also indicates why that is so. Only 22 per cent of people with house insurance said they were "well aware" of what they were covered for even before the change has been rolled out.

Perhaps surprisingly, 35 per cent think they know what it would cost to rebuild their house, though that of course leaves 65 per cent who are not.

The findings have prompted IAG to create a new website which it is aiming to get up and running this week, called need2know.org.nz. This will explain the changes and, IAG says, is aimed at all of New Zealand, not just its policyholders. It will be advertising online, on TV, on radio and in newspapers.

In creating the website, and the online calculator which will be the main tool for people to work out what the rebuild cost of their home is likely to be (59 per cent of people said they would never pay a professional to provide an insurance valuation for their home), IAG found something out about people which may change the way insurers communicate with the public.

Testing revealed that written information on its own is not the way to get many Kiwis to understand complex information, or to provide them with help in approaching a hard task such as using an online calculator to estimate the rebuild cost of their home.

Instead, many of us are highly visual. Mixing the test with greater use of images, audio and film footage got complex messages across far more effectively.

That led IAG to hire celebrity builder John "Cocksy" Cocks of My House My Castle fame to front some films for the planned website to get across information on how to gauge things like the slope under a home, the quality and type of house construction and the age of a home in preparation for using an insurer's online calculator to estimate rebuild costs.

IAG businesses and distributors are shifting to sum-insured policies over the coming 14 months.

All new policies from the following dates will be sum-insured policies: ASB (from May 1), AMI (May 12), BNZ (May 6), Cooperative Bank (May 6), State (May 27), Lantern (April 20) and NZI (April 20).

Renewals of existing replacement policies will see policies begin switching to sum insured from the following dates: AMI (May 12), ASB (July 1), BNZ/Co-Op (June 1), Lantern (July 1), NZI (July 1), and State (May 27).

When people with replacement cover come to the end of their insured period, IAG companies will estimate a sum insured for them based on the information the insurer has about their home, but policyholders have to check whether this is accurate.

There's a lot riding on that.

If the insurance cap (sum insured) they select is too low, for example, and there is a building cost spike after a widespread disaster, the homeowner bears the risk of being under insured.

need2know.org.nz

- ? Fairfax NZ News

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Source: http://www.stuff.co.nz/business/8430964/Survey-shows-insurance-ignorance-is-rife

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