ICNZ warns of insurance payout crackdown

ICNZ warns of insurance payout crackdown | Insurance Business

ICNZ warns of insurance payout crackdown
Owners of quake-damaged homes in Marlborough have been warned that banks are cracking down on insurance-payout spending.

Claims from the Kaikoura earthquakes have now been taken over by private insurers from the Earthquake Commission (EQC), with homeowners set to receive cash payments to handle their own rebuild and repairs. Insurers will receive reimbursements from the EQC.

In a community meeting held last week in Ward, the Insurance Council of New Zealand (ICNZ) advised residents making sizeable claims to inform their bank of how they would be using the money, Radio NZ reported.

EQC chief executive Tim Grafton said it was unfortunate that it took a disaster for people to read their mortgage contracts.

“After an earthquake you suddenly wake up to the fact that you signed a contract with a bank that has a contractual interest in that property, and payments on that property,” he said.

Want the latest insurance industry news first? Sign up for our completely free newsletter service now.

ICNZ spokesman John Lucas said banks would be checking whether or not the payout was used correctly. There are also cases when the insurer would be required to pay the bank if the claim exceeded a certain amount, he added.

John Goddard, a Wellington lawyer who was part of an advisory service for quake-impacted Christchurch residents, said it was not unusual for settlement payments, or part of them, to have been used for other things other than for repairs.

Goddard said it could cause homeowners problems in the future.

“It left them in an awkward position when they would go to sell their property because potential purchasers - as part of their due diligence - would ask: ‘What was the earthquake damage and how was it repaired?’

“Not everyone was able to answer that question satisfactorily,” Goddard told Fairfax.

Goddard also called for a government-backed advisory service in Marlborough, as well as in Bay of Plenty where residents suffered from a serious flood, to help consumers navigate through the insurance process.

“I think people have a real need for free and independent legal advice, so that the decisions they make in the next six to 12 months, which are going to have really significant implications - not just for them but also their communities - are good business decisions,” he told the publication.

Related stories:
Kaikoura quake deemed one of the most expensive insurance events in 2016
NZ insurers to recover $649 million for Kaikoura quake