Insurance chief lauds "significant improvement on where we have been"

Insurance chief lauds "significant improvement on where we have been" | Insurance Business New Zealand

Insurance chief lauds "significant improvement on where we have been"

More than a decade following the Canterbury earthquakes – aka the most damaging natural disaster in recent New Zealand history – the Earthquake Commission Act 1993 is being replaced via the Natural Hazards Insurance Bill 2022, the goals of which include enabling better community recovery. For Bounce Insurance Limited founder and chief executive Paul Barton (pictured), whose pioneering business is the only earthquake parametric insurance provider in NZ, the bill signifies an important shift.

Introduced into Parliament by Minister David Clark, the 89-page bill is currently at the select committee stage of the legislative process. Public submissions are also being called until May 13.

Referring to the Earthquake Commission (EQC), which will be renamed Toka tū Ake – Natural Hazards Commission, part of the bill reads: “The Commission must settle a valid claim as the Commission considers appropriate – (a) using one of the methods set out in section 59 that are applicable to the case; or (b) using a combination of those methods to settle different parts of the claim. The Commission must decide which method or methods to use as soon as practicable after the claim is made.

“After making its decision, the Commission must – (a) notify the insured person of the decision; and (b) settle the claim to the extent to which it is liable to do so under this Act. If the Commission decides to settle the claim (in whole or part) by making a payment referred to in section 59(1)(a), it must make the payment not more than one year after it decides on the amount to be paid. The Commission and the insured person must comply with any procedural requirements in the regulations relating to settling claims.”

In the aftermath of the Canterbury earthquake sequence, EQC received more than 583,000 claims for damage to approximately 168,000 residential dwellings. Settlement of many of these took years. As mentioned above, under the new law (unless changed as the bill progresses in Parliament), payment would have to be made by the Crown entity within 12 months from when the compensation figure was arrived at.  

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“The bill is a significant improvement on where we have been,” Barton told Insurance Business, “and any changes that simplify the regime, and enhance the transparency and responsiveness of EQC and insurers to customers’ needs, has got to be a good thing.

“As we saw in Canterbury, these types of events can have a widespread impact resulting in a large number of complex claims, so any further clarity around the rules and regulations will hopefully result in a much faster policy response when it comes to claim settlement.”

The CEO added: “These changes certainly illustrate the importance of financial resilience in the face of a crisis, and highlights the role that Bounce Insurance plays by providing parametric insurance that pays upfront cash within days of an earthquake.”

Launched by Lloyd’s in 2021, the Bounce Insurance policy was designed to provide immediate cash flow to help kickstart financial recovery. Not meant to replace conventional earthquake insurance that covers substantial losses, the product uses technology and GeoNet data to facilitate automatic payments.

Meanwhile, under the Natural Hazards Insurance Bill, the Commission must have a procedure in place for managing complaints by insured persons; there must also be a procedure for independent persons to review decisions made by the Commission under the complaint procedure in relation to a breach of the Code of Insured Persons’ Rights; and the Commission must be a member of an approved dispute resolution scheme for resolving disputes about decisions on the validity or settlement of claims.

As per the bill, the Commission’s primary objective is to reduce the impact of natural hazards on people, property, and the community. More specific objectives include administering natural hazard cover, contributing to the management of the financial risk to the Crown of providing natural hazard cover, and facilitating the purchase of reinsurance or other risk transfer products.

Unless deferred by the Governor-General, the new law will commence on December 01 next year or 12 months after Royal Assent, whichever is later. The first reading of the Natural Hazards Insurance Bill took place on March 30, 2022. The finance and expenditure committee, to which the bill was referred, has until September 30 to come up with its report that will include any recommended changes.