Poverty premium: Insurance costs up to 40% more for Kiwis in poorer areas

Highlights

• Contents insurance costs up to 40% more for Kiwis in low-prosperity areas of Auckland, research shows.
• All Auckland local board areas classed as ‘low prosperity’ are among the most expensive for contents cover.
• Poorer Kiwis are also less able to benefit from insurance discounts.

New research has found that people in poorer areas of Auckland are being asked to pay as much as 40% more for the exact same contents insurance as those in more affluent areas.

Personal finance information website Banked gathered 240 contents insurance quotes for properties across Auckland and found that those in the least prosperous areas were typically charged the highest prices.

“What we found is a clear ‘poverty premium’ faced by those who are, in many cases, the least able to afford it,” said Kevin McHugh, Banked’s Head of Publishing.

“That a person can be charged a lot more for the same contents cover because of where they can afford to live is disappointing and something that many would agree is unfair.

“With the extreme weather we’ve seen in New Zealand recently, contents cover will be front of mind for many Kiwis. But people in poorer communities may feel that they are priced out of insuring their and their family’s possessions,” says McHugh.

Using Auckland Tourism, Events and Economic Development’s (ATEED) 2020 Auckland Prosperity Index as a base, Banked collected quotes from three insurers for five properties in each of the 16 local boards classified by ATEED as either ‘High’, ‘Good’, ‘Moderate’, or ‘Low’ prosperity for a total of 240 quotes.

The five remaining ‘Outlying’ boards which have no prosperity classification were omitted. A comparatively modest contents sum insured of $20,000 was used.

The research showed Manurewa, Papakura, and Ōtara-Papatoetoe are the three most expensive areas for contents insurance — all areas classed as low prosperity by ATEED. All five local boards within the low prosperity category featured in the top seven most expensive areas for contents cover.

All local boards within the low prosperity category fare well below the Auckland average for ATEED’s household prosperity index, which factors in household income and unemployment, among other indicators.

Banked’s research shows that contents insurance costs, on average, 40% more for those in the Manurewa local board area ($551) than for people covered by the Hibiscus and Bays local board ($393) and 38% more than those in the Devonport-Takapuna area ($400) — areas classed as ‘good’ and ‘high’ for prosperity, respectively. 

McHugh says that poorer people are also less able to take advantage of insurance discounts.
 
“People on lower incomes are less likely to have multiple insurance policies and so can’t benefit from a multi-policy discount, which can be up to 20%. They’re also less capable of paying for their year’s cover in one go and profiting from an annual payment discount, which we found to be around 7%.

“The net result is that the exact same level of contents insurance can cost hundreds of dollars more for people who are less well off.”

See Banked’s insurance poverty premium report.

About Banked

Banked is a financial information and deals website that has the goal of helping New Zealanders make the best decisions on the financial products they need.