The Insurance Council of New Zealand (ICNZ) is calling for changes to the EQC Act to reduce delays and duplicated effort when another natural disaster strikes.
In releasing its submission to The Treasury on its discussion document, New Zealand’s Future Natural Disaster Scheme, ICNZ said it had taken a principles-based approach.
“Our focus is to ensure people are re-housed as efficiently as possible after a natural disaster and to keep insurance cover affordable and available. It builds on the lessons from Canterbury and puts the needs of New Zealand and New Zealanders first,” ICNZ Chief Executive Tim Grafton said.
“There were times when we could have put up a case that only served our commercial best interests, but that was not the right thing to do,” he said.
Some things should not be changed - what has served New Zealand so well in Canterbury is the high insurance penetration that arises from the EQC picking up the first loss and the private insurers covering the layer above. This keeps insurance affordable and maintains natural disaster cover for New Zealand homeowners. It has meant New Zealand is the envy of the world in providing about 98% residential cover for natural catastrophe.
“However, what has not served homeowners well though is the legislative requirement that all claims be lodged and assessed by the EQC. This has resulted in homeowners and insurers being unaware of hundreds of over cap claims until years after the earthquakes.” he said.
Claims should therefore be lodged and assessed by insurers because one without the other does not solve that problem. Also, insurers’ core competency is the management of claims, so legislation should make it clear that insurers and EQC should enter into contractual arrangements to that end before a new Act comes into effect.
“Insurers employ thousands of New Zealanders, operate 24/7 and manage over one million claims a year. When disaster strikes they are ready to respond whereas the EQC, which had 24 staff before the Canterbury earthquakes struck, cannot match that state of readiness,” he said.
“A new Act must provide certainty about where responsibilities and obligations lie before catastrophe strikes. If adopted, this will eliminate factors that led to duplication of effort, inefficiencies, additional costs and delays with the residential recovery. This will result in a quicker recovery with associated economic and social benefits.”
To that end, the EQC cover should follow that of the insurer. This would mean all assessments and repair standards are based on what homeowners took out their insurance cover for, so there is no bias in assessment whether the loss is under or over the EQC cap. That would settle many areas of dispute.
“We also believe there is a severe risk of under-insurance that could leave people without a home if The Treasury’s proposal to have a single building cover is adopted. This is because no homeowner nor anyone else has any idea what the land-foundation costs will be after a major event like an earthquake on hillside cities like Wellington.”
“So, we argue for a separate land-foundation works cover for the additional costs to provide a building platform after an event over and above what would be required today.”