Modernising the EQC Act - Will I see cheaper prices?

The modernising of the Earthquake Commission Act (EQC) should be good for most Bounce customers who tend to reside in earthquake prone regions of New Zealand.

These changes are focused on ensuring continuing accessibility and affordability of insurance in the more seismic regions of New Zealand. This is great for homeowners in Wellington and Christchurch.

What does this change mean?

Firstly, the Government will increase the EQC residential building cap from $150,000 (plus GST) to $300,000 (plus GST) from the 1 October 2022. Not only does this change help in keeping up with increases in building costs, but it also ensures that homeowners have access to some cover to support their home repair after a big quake.

Secondly, this change expands the role of “community-based” pricing which means that less-seismic regions (i.e. Northland and Auckland) are effectively subsidising those homeowners in the more earthquake prone regions of New Zealand (i.e. Wellington, Christchurch and Hawkes Bay). Theoretically, this means that insurance prices should become more affordable (i.e. reduce) in seismic regions like Wellington and Christchurch.

Actuary firm, Melville Jessup Weaver did some terrific analysis (“Changes to the EQC Cap – what does it mean for insurance prices?”) and concluded that there should be a $568 decrease in average premium in Wellington. The Minister Responsible for EQC (Dr David Clark) has made it clear that he expects insurance premiums to reduce because of this change and noted: If insurer pricing doesn’t behave as expected, the Government is open to considering options such as a competition study to give consumers assurance the market is competitive.


What can we realistically expect to happen?

Hard to say. Some insurers may look to adjust their pricing downward in accordance with the EQC cap change. Others may form the view that there is already a general tendency of under-pricing in places like Wellington and Christchurch, so they may see this as an opportunity to increase relative prices (i.e. not move prices down as they might with this cap change). Theoretically competitive forces should support these changes; however, this assumes that consumers are able to “shop around” for the best insurance policy at the best price.


For more information:

Please see the announcement. The Minister Responsible for the Earthquake Commission, Dr David Clark announced on 30 September 2021 that the Government from 1 October next year.

This modernising of the Act follows on from the recommendations made in Public Inquiry into the Earthquake Quake Commission.