Insurers to take over EQC claims handling

Monday, 2 November 2020

The destruction to road and rail along the South Island's east coast.

Homeowners whose properties are damaged in a natural disaster will soon only need to make a claim through their private insurer, and will not need to approach the Earthquake Commission separately.

The partnership between insurers and the commission will take effect in the second quarter of next year.

“These arrangements will ensure that customers can deal with their insurer who will assess, manage and settle their claim,” said Tim Grafton, chief executive of the Insurance Council of New Zealand. “This will ensure a more effective and efficient response, delivering simplicity and certainty for customers during a very stressful time.

“Customers must always come first and developing these arrangements in partnership with EQC will ensure New Zealand has one of the best natural disaster response platforms in the world,” he said.

* Private insurers join Christchurch earthquake claim resolution service

* Homeowners with pending private insurance claims could miss out on new quake service

Grafton said many people had previously had nothing to do with EQC before they made a claim, and were more comfortable dealing with their own insurers.

Minister Responsible for the Earthquake Commission Grant Robertson, centre, and Minister for Greater Christchurch Regeneration Megan Woods, with EQC chief executive Sid Miller in 2019.

Eight private insurance companies – AA Insurance, Chubb, FMG, Ando (Hollard), IAG, MAS, Vero and Tower – worked with EQC on the partnership model.

The partnership built on the model used after the Kaikōura earthquake, and more recently in responding to the Northland floods in August.

Grafton said that experience had been more seamless and faster and the industry had wanted to explore how it could make it more permanent.

Insurers would have to integrate EQC claims management processes through their own systems to act as its agents.

EQC chief executive Sid Miller said the Canterbury earthquakes had highlighted that it was inefficient and frustrating for customers to have to make two claims, one to EQC and the other to their insurer to top up the losses.

This would give the industry greater capacity to deal with future events and bring together the industry’s resources in one co-ordinated way.

Under the new agreements, private insurers will manage the total claim, including the EQC portion up to the statutory capped level of damage, and then any claim under their private insurance to cover additional losses up to their sum insured. Under the partnership, insurers will also provide data to EQC about where insured homes are located, so EQC can better model its exposure to natural hazards.

Miller said it built on the findings from the Government’s public inquiry into EQC, as well as the lessons learned from the Canterbury and Kaikōura earthquakes, to benefit all New Zealanders for the future.

“We know that EQC cannot respond to a large natural hazard event alone, and this new partnership will streamline the insurance process and ensure we make best use of existing sector capability and expertise to meet the needs of New Zealanders when the next natural disaster occurs. Once set up, it will double our capacity to manage claims from a natural disaster.

“This much improved customer experience, improved data sharing, and increased claims capacity is a milestone for improving our readiness to deal with future natural hazard events,” Miller said.

“If a natural disaster event occurred before the new model commences, we would respond in the same way we currently do and for any large event, the intention would be to use a similar response model to that used for the Kaikoura earthquakes.”

IAG chief executive Craig Olsen welcomed the announcement.

“IAG has worked closely with the EQC, ICNZ and the broader industry to drive these changes because our customers have told us that dealing with multiple organisations to settle an insurance claim added unnecessary complexity. By simplifying the claims experience, we want to make our customer’s recovery more streamlined at what can be a very stressful time.”

The Claimants Reference Group, which represents consumers' interests, said it was positive that homeowners would have one point of contact, no need to file two claims, no need for EQC and insurer to double up on assessments, and the insurers would be much better resourced to be ready to go following an event.

But chair Ali Jones said it did not solve one of the critical findings in the EQC report about the assessment of damage.

She said unless assessments of damage were thorough, consistent and accurate, partnering with the private insurer is not going to address the significant issues claimants have faced, and continue to face, many years on.

“We do think that this is a wonderful opportunity for EQC to now be able to focus on quality, enduring outcomes, and reducing distress for claimants.'

Paul Finch is a project construction manager and chartered building engineer who has helped with more than 30 insurance claims since the Kaikōura earthquake.

“It was not hugely successful for homeowners,'' he said. “One couple I visited recently said they were now selling up to be able to see out their days.''

Finch said while some people were just happy to take a payment and walk away, they had not necessarily been well treated by their insurer.

“In central Kaikōura in particular, I think insurers felt they could get away with more because it wasn't as high profile as Christchurch.

“I don't think this new model is going to bring about the change that's required.''

Finch said while there were 'progressively more palatable outcomes'' with earthquake claims, they were not enough, and he still expected to see actions played out in the courts.