New Zealand’s insurance sector was rocked to the core when the Canterbury earthquakes struck in 2011, with insurers, government bodies and homeowners still feeling the effects seven years down the line. The event was unprecedented in scale, and has offered up possibly the greatest challenge to New Zealand’s insurance industry over the last decade.
The sector has since grappled with the sheer volume and complexity of the claims that have come pouring in, some of which are still in the process of being settled to this day.
At the heart of claims resolution sits The Earthquake Commission (EQC), a Crown entity operating for over 70 years aiming to provide ‘efficient claims management’ in the immediate aftermath of an event. Over the years it has largely served its function, however, it has come under some heavy criticism over the last year for flawed claims handling – most notably in relation to the Canterbury earthquakes – and has suffered from understaffing, dual claims handling and poor data quality.
A flurry of activity has been kicking a number of improvements into gear over the past year, aiming to get those last unresolved claims over the line and address some of the issues which have led to them remaining unresolved seven years on.
“From my perspective, it was the dual insurer-EQC scenario we had back in 2011 which was the real hurdle to getting these claims resolved,” Christchurch-based insurance broker Greg Swaney of Alliance Grice Insurance Broking Group told Insurance Business.
“You’d have one assessment of an EQC report from the engineers and you’d have the insurer assessment, and they could be wildly different. That’s where the problems really started to come to the forefront.
“But I think EQC on the whole has been pretty good to the public, and they’ve stood behind their work – certainly when there’s been a problem in the past with things like repairs, they have come through and delivered on their promises, and they’ve remediated those issues.”
“The way EQC has handled the Kaikoura event has been much cleaner,” he added. “There you had the insurer working on the claim from day one and with one set of reports, and that particular change is going to make a huge difference to claimants.”
The issue of engineering advice has again come to the forefront with the government announcing the addition of an expert panel of engineers to help expedite the remaining unresolved claims. The panel will form a part of its Greater Christchurch Claims Resolution Service (GCCRS), and will work closely with the EQC to connect homeowners with the support they need to resolve their outstanding insurance issues.
According to Susan Freeman-Greene, chief executive of Engineering New Zealand, engineering disputes have been at the heart of many of these claims, and have been a crucial factor in preventing their resolution.
“These disputes can be quite complex in situations where two engineers have worked from different briefs,” Freeman-Greene explained. “If an engineer was briefed by an insurer, they would have been told to use a methodology designed to repair. If they’re briefed by a homeowner, it would be designed to replace. It then looks like you have two engineers disputing a technical issue when it’s actually a policy interpretation issue, and this is something our panel hopes to help unravel.
“The panel will work with all parties involved, and it essentially aims to do two things – it will apply engineering advice at the right time in the claims process, and it will facilitate resolving these technical disputes and help come to a common agreed understanding of what the solution is.”
The EQC has welcomed the GCCRS since its announcement, saying that resolving outstanding claims ‘fairly and efficiently’ will remain its first priority. According to deputy chief executive, Canterbury and external affairs Reneé Walker, it will also look at ways to improve the claims experience going forward, with new initiatives including earlier engagement with insurers and alternative dispute resolution strategies.
Insurance broker Greg Swaney says the current issues have now extended to selling on rebuilt properties, with insurers potentially not being able to bear the costs of an EQC-repaired home under a different policyholder. He also says the EEC’s current limit of $100,000 for rebuilds needs to be looked at as it hasn’t been adjusted for the inflation since the 90s, and is no longer reflective of a realistic rebuild cost.
“We’re seeing some issues now where clients have sold a property between the earthquake events and the present day, and the new owner discovers an issue with the earthquake repairs,” he explained. “Of course, the insurers only have to settle those repairs on an indemnity basis, because those owners weren’t the policyholders at the time. This has caused huge problems, and, unfortunately, the insurers have been somewhat the authors of their own misfortune in this regard. It’s issues like that that have led to the government pushing forward with initiatives like its earthquake tribunal.”
“The EQC limit of $100k also needs to be extended,” Swaney said. “Back in 1993, that amount of money perhaps did represent the cost of rebuilding a house, but that hasn’t been inflation-adjusted which I think was a gross oversight by the government at the time. This is a detail which definitely needs to be changed.”
Ultimately, only time will tell whether any these improvements will bear fruit. But with the insurance sector having been put thoroughly through its paces and significantly more practiced, experts say we are now in a better position to handle any events that may come our way in the future.