Christchurch quakes: the lessons learned
ICNZ CEO Tim Grafton talks about what issues remain 3 years on from the devastating Christchurch earthquakes
Video transcript below:
Reporter: The Canterbury earthquakes brought several challenges to the insurance industry. But three years on what challenges remain and has the industry learnt from this experience?
Tim Grafton, CEO, Insurance Council of New Zealand
Tim Grafton: There are three main challenges remaining in the Canterbury earthquakes. There is the land issues, Port Hills issues and multi unit dwelling issues. Let’s start with the land ones. The land issues revolve around land that’s subject to liquefaction, more so than it was before the 4th September 2010 and land’s that bought subject to flooding. In both those areas, land is the issue for EQC to solve because they insure a certain part of the land on a site by site basis, not area wide so the complications that arise due to that. What we need is certainty around the quantification of the compensation for the land owner. Therefore they can make the decisions about where they want to go in terms of their repairs and rebuilds. Gnarly problems and still have to be worked through.
Second area multi units, you’ve got multiple insurers, multiple insurance policies, uninsureds and needing 100% agreements of all dwelling owners to be able to move on in terms of a reinstatement solution. That requires a whole lot of relationship issues as well as managing the reinstatement. We are working on that very successfully and we will be having lead insurers and their project management offices dealing with it on behalf of other insurers involved, but there are still complications there as you can appreciate if there are uninsureds. In the Port Hills we have got land damaged areas, mass land movement, City Council has provided an initial report, more reports are coming. Until those reports are out over the next few months and whether or not those need further building guidelines, it’s going to cast some doubt over how far we can progress some of the rebuilds and repairs in that area.
There are other issues in the Port Hills around retaining walls, where some public information will be going out very shortly from the City Council. Basically the issue there is, if the retaining wall is not on your property and that person who owns the retaining wall doesn’t fix it or can’t fix it or can’t afford to fix it, then you don’t get the consent for your house. So all that needs to be solved and there is other issues there. But those are the main issues.
I think the biggest lesson from the Canterbury earthquake is for the insureds and how the insurers and the EQC could be doing a much better job on their behalf. I think nobody anticipated what would come from the catastrophe of the Canterbury quakes, so what we have got to look at is an alignment of the EQC Act with standard insurance policies, so wordings don’t create problems for the insureds.
We have got to look how assessments are done post catastrophe, so we don’t get multiple layers of assessments that just lead to confusion for people. We have got to have better data systems to ensure that people can be tracked through the progress and well informed about how the recovery is going for them. So there are a whole lot of lessons around that territory. In the business space, business interruption insurance, I think there is an opportunity there for products to be brought on to the market, I haven’t seen any of that as of yet, but BI was kicking off the cost of material damage to buildings, what was happening to businesses was as a result of the population, say if you are in the tourism industry, depopulation meant you are out of business or losing business but your building wasn’t damaged. So you’ve got to think smart you know around the kinds of things that can happen post catastrophe and we also have access to the CBD divide for well over a year, so that also has an impact on typically 12 month BI policies.
And I think another thing we’ve learnt from the Canterbury earthquakes is that we had a profusion of policies in place, levels of coverage vastly different, we have got to have a competitive space in there, but we must have had 70 or 80 different policies operating and trying to get that sorted creates some problems. So some common wordings and common understandings across policies are areas that we have been working on, particularly in the commercial space, so that’s got to be important going forward and I think another learning is what do you do with land and the government has had the Earthquake Commission review, we haven’t seen where that’s going to, we expect some public consultation on that, but the issue of land insurance is one that is really gnarly, like I have said around liquefaction of flood, the calculation, quantification of compensation hasn’t been done before. Land insurance came in after the Abbotsford disaster in 1979 when houses lost totally the land, so it was brought in to provide the minimum land area where you could build a house in an earthquake situation, the land is still there, but if it’s absolutely melted, how do you quantify the compensation there, that’s another issue we have got to learn from and work that through and also how do you deal with area wide damage because the EQC Act just simply applies to site by site which is not adequate in this kind of circumstance.