The country's biggest insurer IAG, which owns State, NZI and AMI, is no longer writing new contents cover in risk areas like Wellington.
IAG is defending itself against claims it's abandoning Wellingtonians by banning new customers, saying it's due to the city's earthquake risk factor.
Mortgage broker Bruce Patten told Kate Hawkesby the government needs to step in before it becomes worse.
He says other insurers have been turning people away as well.
"It's very concerning. This is a major issue covering nearly 50 percent of the market, which they never should have been able to gain. People who don't currently have policies with IAG will most likely not be able to get them now."
Asked if this could result in a rise of premiums for the region, Patten said he expects to see a snowball effect ripple through the market.
"You take 50 percent of the market out, it puts all the pressure on the other insurers and they will start pulling out because they will have the market share in the area, it's a snowball effect.
"You can't let this happen quickly early on without intervening."
Patton says although he thinks IAG have done a poor job reassuring customers, it's a problem many other insurers will now have to grapple with.
"This has been really poorly marketed by IAG, they have done a terrible job. I have seen evidence of people ringing around insurers in Wellington and being told they won't be covered.
"It's not just an IAG problem, there are others as well. The Minister needs to get everyone around the table to try and sort this out."