Real estate agents fear there could be serious effects for home buyers and sellers in Wellington with IAG turning down more customers in the capital.
Some in the real estate industry said it had become far harder to get insurance in the capital in the past six months, and premiums were on the rise.
Two weeks ago, IAG, which owns State, AMI and NZI, started turning down homeowners in the capital - but has insisted it is not a blanket policy.
Banks will not lend money on uninsured property and real estate agent Euon Murrell said the effects of IAG's move were already being felt.
He knew of one potential buyer who was declined insurance on Wednesday.
"They wouldn't transfer the policy from an existing one to a new purchaser, they said, 'No, go elsewhere.' "
Mr Murrell said the insurance company NZI did not investigate the property nor the interested buyers before denying the coverage.
"It was just a flat 'no.' "
Mr Murrell was concerned IAG would not be the only one to take such a step.
"We see it growing ... if one's going to do it then the others will be looking to also, and we would have huge concerns that this would spread and create problems for both sellers and buyers."
It had been harder to get insurance in the capital over the last six months and premiums had doubled in the past one or two years, real estate agent Nicki Cruickshank said.
There was another company in the city that was indicating it would follow IAG's lead, she said, but would not say which one.
"We're hoping that some new players might step into the market but it's certainly not easy for purchasers. It's becoming one of the most difficult things in purchasing a house."
All of her clients except one had been able to get insurance recently. But those who could not get insurance could not then get a mortgage.
"There's a couple of apartment complexes in the city that can't get insurance for natural disasters so, therefore, people will not get mortgages on those apartments, and they become unsaleable. So, it is a real problem."
IAG said it brought in its tougher approach in the past couple of weeks but Lower Hutt woman Rochelle Gribble said she hit a wall last September when she tried to swap to one of its brands.
"They were really clear that they weren't covering anybody in the Hutt Valley or Wellington region, and that they had changed their policy since the Kaikōura earthquake and now weren't offering coverage to new clients."
It appeared Wellington was not the only place IAG was cutting back.
Canterbury man Brian Cox and his wife had been in their home five years and were insured by AA.
They had done a ring-around earlier this week, in search of a cheaper deal.
The first provider they tried was State Insurance, owned by IAG.
"We talked to them and they were very cagey at first and then said that 'We are no longer taking on new house policies in Canterbury.' "
An IAG spokesperson told RNZ what Mr Cox said was incorrect.
However, Mr Cox's wife had spoken to a supervisor who confirmed the policy change.
- By Laura Dooney