IAG provides home insurance guide on meth contamination and its insurance consequences

MARCH 2017
Confusion around landlord responsibilities, potential lack of understanding of the health consequences, and the overall place of insurance in helping homeowners concerned about potential methamphetamine contamination of homes has prompted insurer IAG to provide a new guide for customers.
 
At the same time IAG is working through insurance policy wording changes to ensure greater consistency and clarity around responsibilities and levels of cover available.
 
IAG’s booklet “Your Guide to Methamphetamine Contamination” is being made available as an e-book and distributed initially via the AMI brand and insurance brokers within NZI’s network.
 
Like a range of issues related to methamphetamine, insurance for contamination can be complex due to different views and expectations, says Craig Dowling, IAG’s New Zealand Head of Corporate Affairs.
 
“Because meth contamination of homes is a relatively new phenomenon, different policy wordings can lead to different outcomes at claims time and that is generally not a good experience for anyone. As a result we are aligning terms across our brands over time and seeking to communicate clearly what expectations customers can have of us, and what we have of them as homeowners.
 
“We are also sharing advice and tips for people unsure of what to do in different circumstances.”
 
IAG’s booklet outlines:
  • What homeowners need to know about meth
  • What to do if you suspect your home is being used as a meth lab
  • What to do if you suspect meth use in your home
  • Changes to home insurance policies
  • Your insurance obligations as a landlord
  • Inspection tips
  • How and where to get help

IAG Meth Booklet.pdf

IAG Meth Booklet - printer friendly.pdf

 
Summary of contamination cover changes
 
IAG policy changes being implemented across brands through this year will extend cover to all homeowners insurance policies, with conditions, not just landlord policies.
 
Going forward claim acceptance will be based on the presence of contamination, not reliant on the cause (i.e. irrespective of whether caused through manufacture or use).
 
There will be a change to the maximum claimable amount, which for most policies constitutes a $5000 increase from $25,000 to $30,000. However there will be an increase on IAG excesses – the first amount needed to be paid by customers – for methamphetamine contamination claims from the standard excess of $400 to $2500. This is to ensure homeowners are incentivised to make efforts to minimise losses by doing what they can to protect their homes.
 
As the majority of contamination claims to date involve rental properties, and claim numbers and overall claims costs involving methamphetamine contamination have increased in recent years, premiums across landlord policies will see some increases directly related to the cost of these claims and the changes to levels of cover. Premium increases depending on policies, will range from between $40 to $130 per annum.
 
Claims will not be accepted for contamination to contents in homes, as it is too difficult to determine the timing and nature of any event causing contamination.
 
 
Some insurance facts
 
IAG’s claims costs for meth contamination in the last 12 months are around $14 million.
 
Average home decontamination costs (cleaning a contaminated home to test levels within current Ministry of Health guidelines) somewhere between $20,000 - $25,000. The range however is large. Decontamination costs typically range from $2,000 - $50,000.
 
Over the past year IAG, across its brands, has received an average of 60 claims every month.
 
Costs for detailed testing range from $3,000 - $10,000.
 
 
Going Forward
 
The cost of claims has a direct impact on insurance premiums, and therefore needs to be managed to keep premiums affordable.
 
Across our brands, we see increasing claims related to contamination of homes. At the same time an unregulated industry has developed around testing for contamination and subsequent cleaning of properties and that has contributed in some situations to misinformation about risks. We are in the process of establishing a list of preferred partners who can provide our customers and ourselves confidence in the work they do.
 
Insurers have a role in signalling risk and trying to prompt better behaviours through how we construct our policies. Our view is that we need to be very clear about levels of cover, and that includes establishing a higher excess so that landlords are encouraged to vet prospective tenants and monitor their homes rigorously, and that homeowners themselves remain vigilant and take steps to avoid costs associated with contamination.
 
It is a societal issue and we are looking at providing more awareness on how to detect the contamination and its health impact for our customers in the future. We are saddened to see the impacts of methamphetamine use across our communities, and hope that efforts to help those who have fallen victim to the addiction and the cycle can somehow be broken.
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