This week, law changes to the Residential Tenancies legislation is set to strengthen renter’s rights. It aims to transition a landlord’s rental house into a tenant’s home.
Looking specifically at landlord insurance, the change that will have the most ramifications on landlord insurance is the removal of no-cause evictions. Essentially, it will be more difficult for landlord’s to remove bad tenants and from a risk management perspective this is not a good thing. Other changes to the legislation such as limiting rent increases, and banning rent bidding are unlikely to have a direct impact on landlord insurance.
Landlord insurance provides cover for intentional damage by tenants. If troublesome tenants are harder to remove then landlord insurers will consider that there is a higher risk that the tenant will cause damage to the property. It remains to be seen but this could lead to an increase in the value of deliberate damage insurance claims. Working out how and when the damage occurred could be further protracted when there is a tenant that is unwilling to co-operate and cannot be removed from the property. It has always been about working with the landlord, the tenant, and the property manager (if applicable) and this will not change when it comes to insurance.
While tenant damage could increase under the new rules, the legislation changes could in fact improve risk management and reduce the incidence of damage. Our view is that with bad tenants being hard to evict, it will mean that landlords increase their scrutiny during tenant selection. So, ultimately tenants with a poor record and lack of supporting references may find it harder to get rent a property, which would filter out bad tenants and lead to lower claims payouts for insurers.
The ultimate outcome of the law changes is difficult to predict. It is unlikely that insurers will make any adjustments to premiums or policy conditions as a result of the reforms.
The bulk of the legislative changes are set to be put into practice in early 2021. We expect that it will take at least 12 months before we see any outcomes or trends on claims.
Initio is a New Zealand-based online house insurance provider. Founded in 2011 by a couple of Kiwis, Initio set out to change the broken insurance industry by using technology to put control back into the hands of the customer.
Covering landlord insurance, short-term holiday rentals and home and contents, Initio specialises in tailored online property insurance, including an all-in-one landlord insurance with built-in cover for loss of rent and damage by the tenant.
Having completed over 35,000 automated insurance transactions, Initio’s market-leading policies can be quoted, bought and amended online – all in an instant.
Initio is underwritten by NZI, a business division of IAG New Zealand Limited.