The term risk-based pricing relates to the way insurance is calculated and is based on how 'risky' a place is to live. New Zealand has many natural hazards, or risks, including storms, floods, earthquakes, and landslides. As a result of these natural hazards, some places are considered riskier than others.
Previously, the difference in risk across the country wasn't always fully reflected in premiums. That's because it was often balanced using cross-subsidisation, so premium differences were off-set by other customers. Using third-party data, we’re able to estimate the probability and impact of natural hazard events and price premiums accordingly. For example, if your home has a higher risk of a natural hazard event occurring you could pay higher premiums, and vice versa.
The risk associated with locations around New Zealand is just one factor that may affect premiums. Some of the key pieces of information that impact your premium can be found here.