Insurers hit back at ‘slow quake response’ claim

by Maryvonne Gray 21 Feb 2014

Insurers hit back at ‘slow quake response’ claim

On the eve of the third anniversary of the Christchurch earthquake, New Zealand insurers have hit back at claims they are among the world’s slowest to respond to a disaster.

The response came from the Insurance Brokers Association of New Zealand (IBANZ) following a report from global broker firm Marsh which compared the responses to three of the most expensive insured earthquakes in history in Japan, Chile and New Zealand.

IBANZ CEO Gary Young agreed that there were some findings to learn from in the report but stressed the importance of remembering the details were very different in each scenario.

He said: “To make a bold comment that New Zealand is the slowest to respond ignores the detail of what was really going on in those countries.

“Chile didn’t have the major urban impact whereas Christchurch it was smack bang in the middle of the CBD.

“Then you’ve got Japan, which is the 3rd or 4th biggest economy in the world and New Zealand is just a tiny little country so there’s no way we’re going to have the major resources available to a major economy, and the fact that we’re at the bottom of the world it’s hard getting them here in a hurry.”

The earthquakes, occurring between 2010-2011, had a combined insured loss currently estimated in the region of $60 billion.
Its findings showed that most claims filed by Marsh clients in Chile were settled within 12 months and the majority within 18 months in Japan.

But progress was much slower in New Zealand, with 16 per cent of claims closed after 12 months, and 32 per cent after 18 months.

Three years on about a quarter of the claims still remain to be settled.

The report said New Zealand was ''the least prepared of all from an insurance perspective''. 

''Christchurch had not been regarded as a high-risk earthquake zone, and, as a consequence, people were underprepared for the February 2011 earthquake,” it said.

In New Zealand the reason for the considerable amount of outstanding claims that still remain was put down to practical issues such as the closure of the CBD, ongoing earthquake-related activity and practical difficulties assessing the scope and nature of the damage, which is reflected across the industry.

Marsh’s Executive Director for Sales and Marketing, Steve Walsh, said the idea of the report was not to say who was the worst or who was the slowest, but to compare things from a coverage and the claimant perspective.

“However you can’t avoid the fact that on the non-commercial ie the residential, that the processing of claiming is complicated by having to report to both the EQC and the individual insurance companies and that’s just a matter of fact as opposed to any opinion,” he said.

Young agreed there were lessons to be learned here: “I agree the EQC has been an issue and their interaction with the insurers.

“The EQC wanted their loss adjustors to look at every loss and the insurers wanted their loss adjustors to look at theirs. It was a resource that was already far too small and then to duplicate your requirement of them, that’s just crazy, so we’ve got to be more sensible in future.”

Walsh felt if another disaster happened in New Zealand the ability to ramp up the services for loss adjusting, engineering and all the support services would happen a lot more quickly and efficiently too.

“From a client’s perspective be they small, medium or large, they would now have much more focus on emergency preparedness and recovery from any kind of disaster.

“My intuitive feeling is that companies are addressing it but if they don’t those problems will be evident during the next disaster.

“From the insurance companies perspective the approach they’ve taken now will see them in much better stead to settle quickly and efficiently in the future, so sometimes they would have applied the absolute letter of the law whereas now they might be happy to engage in a cash settlement to expedite the settlement of claims.”