Under-insured Housing

[PC]

Then the cheeky sods class each and every bit of damage as a separate event.
Please pay excess for each event!

[elguapo]

Why should the State underwrite the risk simply in order to lower consumers' premiums ?

On the grounds that these overseas risk assessors have overstated the risk considerably and the premium demanded is too steep. You could then argue there is a quasi public good in the State providing that collectively.

I would expect that to be costly for the Govt in terms of credit risk and subsequent cost of borrowings.

I did say there is a decent argument for it, not that it was without downside, nor that it was 'the thing to do'.

Next you'll have us believe the State should fully own our power generators in order to lower consumers' power costs.
Who would ever think such a thing ?

That's actually quite a different thing. That's just a direct consumer subsidy.

[elguapo]

One way to semi self insure is to take a high excess.
I have $1k but am wondering what it would do to my premiums if it was $10k.
Insure for the big event that could cause you to buckle - I can afford broken windows and the odd carpet etc.

Exactly. I generally do this for all insurance where I can.

[speights boy]

On the grounds that these overseas risk assessors have overstated the risk considerably and the premium demanded is too steep. .

The case putting forward that proposition would be interesting to read.

[elguapo]

The case putting forward that proposition would be interesting to read.

Yeap. Of course the insurance companies would, I imagine, be saying the premium's were too low for decades, given the risk, up to the CC earthquake.

[speights boy]

^ And that would be easy for them to argue I reckon.
Post ChCh we certainly know a lot more about how a lot of the land that city is built on behaves in a quake.
We did not have this amount of evidence before these quakes.

[elguapo]

Quite possible. I'm sure the insurance industry is generally better equipped to judge these things than governments. It's not uncommon though to have risks that are so commercially unattactive to the point state cover is the only option, i.e. nuclear power plants.

[klauster]

NZ is not more risky than other areas. Shaking up CHCH has triggered to align NZ insurance with international standards, but that has nothing to do with my initial question regarding the process how homeowners get a number called rebuild value. Even insurers don’t care what the number is because the homeowner carries the risks to be over or under-insured (of course the higher the better for premiums to pay).

To illustrate I tried different rebuild-value calculators compared with professional rebuild estimations and the results – I would guess a child in the kindergarten would estimate similar accurately. What is the basis for these estimations – price index and inflation multiplied by factor X how many times? Also the professional opinion is a guess.

Let’s look at an example: 3-br house built in the 40s for less than 10k (land excluded), market value around 350k (135k house) should have an estimated rebuild-value of 435k. That is in 70 years a price increase of 4240%, or for a recent built 3-br house for 350k an estimation of more than 160%.

What is wrong with the process when nobody can tell you why the rebuild costs jump up (quasi over night) by 160%? It gets very close to the scam level in credibility. It has nothing to do with the insurer – solely it is a matter how housing costs, rebuild values (whatever you call the numbers) are composed.

[speights boy]

To illustrate I tried different rebuild-value calculators compared with professional rebuild estimations and the results –

What was the difference between the calculator and a QS (one with professional indemnity insurance)

[klauster]

Each possible case will be specific.

I talk about awareness that the situation hasn’t improved (as changes to the industry have been sold to homeowners). Good is that the homeowner can choose the “numbers” for house insurance cover, but the initial problem we have seem in CHCH, what the homeowners get for their money is under insurers’ and builders’ discretion. The same you can experience with quotes, one builder’s appraisal is 300k, another estimates 500k for the same work. The risk why so many households in CHCH are still in limbo hasn't been tackled.

A proper organized process, I would expect (similar to the IRD chattel depreciation guide) a catalog based on the current price index (outlining the components like 100 sqm, flat roof, floor insulated, 10kWatt heat-pump, etc) leads to an individual rebuild-value, that can be update for the next year, 2 years or 5 years base on changes to the industry (e.g. council fees) and inflation.

The “guess work”, the solution for CHCH problems is just misleading to people who work lifetime long for a mortgage free home. It’s a pity.

[Maccachic]

Each possible case will be specific.

I talk about awareness that the situation hasn’t improved (as changes to the industry have been sold to homeowners). Good is that the homeowner can choose the “numbers” for house insurance cover, but the initial problem we have seem in CHCH, what the homeowners get for their money is under insurers’ and builders’ discretion. The same you can experience with quotes, one builder’s appraisal is 300k, another estimates 500k for the same work. The risk why so many households in CHCH are still in limbo hasn't been tackled.

A proper organized process, I would expect (similar to the IRD chattel depreciation guide) a catalog based on the current price index (outlining the components like 100 sqm, flat roof, floor insulated, 10kWatt heat-pump, etc) leads to an individual rebuild-value, that can be update for the next year, 2 years or 5 years base on changes to the industry (e.g. council fees) and inflation.

The “guess work”, the solution for CHCH problems is just misleading to people who work lifetime long for a mortgage free home. It’s a pity.

Google Rawlinson Guide.

Our QS work across the country so have real time accurate records of these figures as well, which is shared with the Valuers.

[klauster]

Thanks Maccachic, I know that - a good tip for people who need assistance,
but is the Rawlinson Guide bound to insurers, builders and alike?

[Norwest]

Let’s look at an example: 3-br house built in the 40s for less than 10k (land excluded), market value around 350k (135k house) should have an estimated rebuild-value of 435k. That is in 70 years a price increase of 4240%, or for a recent built 3-br house for 350k an estimation of more than 160%.

What is wrong with the process when nobody can tell you why the rebuild costs jump up (quasi over night) by 160%?

You need to factor in the fact that you have to remove the fully destroyed home and clear the section properly, and building inflation has gone up dramatically in the last few years so I wouldn't be suprised if a 350k house full rebuild "like for like" would cost 435k from an event that fully destroyed the property.

[klauster]

Norwest, “building inflation has gone up dramatically”, what do you mean – how much (2%, 3%, 7%??)
Look at the attached table even by astronomic 7% (silly, but just theoretically), still after 10 years by 7% it is below the estimation. How much do you take for section clearance - 100k?


Don’t mind the example, the problem is - everybody talks about different numbers your valuer, insurer, builder – do you trust your insurer’s discretion as the CHCH people did?