The Natural Hazards Commission Toka Tū Ake is urging people to understand the limits of their insurance cover as just over half of insured New Zealand homeowners say they expect full compensation for natural hazard damage to their land.
The Natural Hazards Commission (NHC) recently commissioned a survey asking people about their awareness of natural hazards insurance and their expectations when it comes to natural hazards insurance claims.
“Land cover is specifically designed as a contribution payment, not full cover,” the NHC’s chief executive Tina Mitchell says.
Homeowners pay a Natural Hazards Insurance Levy and this is part of their insurance premium.
This money goes into the Natural Hazard Fund and is used to cover claims after a natural hazard event. The fund is also used to buy reinsurance from international financial markets, meet the costs of administering the NHC scheme and goes towards research and education.
For each natural hazard event, the NHC pays a maximum of $300,000 plus GST towards rebuilding or repairing a residential home. This is called a building cover cap and the Natural Hazards Insurance Levy is currently 16 cents per $100 of the insurance cover amount.
There is also some cover for damage to land, but the NHC does not cover the whole thing.
The NHC says people are covered for land that is:
- under their homes
- under some related buildings and structures like a garage
- within eight metres of their homes and some related buildings and structures
- under or supporting their main access way up to 60 metres from their home such as under their driveway
People can also be covered - to a limit - for some retaining walls, bridges and culverts.
Called the land cover cap, the NHC says this is calculated by adding "the market value of your insured, damaged land" and "the value of your insured, damaged retaining walls, bridges and culverts, to a limit".
An independent valuer decides the market value of land while the maximum value for retaining walls, bridges and culverts depends on the date of the damage.
With 56% of insured New Zealand homeowners saying they expect full financial compensation for natural hazard damage to their land, the NHC says the contribution for land cover is standalone and cannot be topped up with private insurance.
Mitchell says: “The limits of cover available ensures every homeowner across the country gets access to some protection, and helps keep the scheme affordable as it is funded by the homeowners."
The commission knows damage from natural hazards like landslides can be expensive to fix, the chief executive says, and there can also sometimes be a difference between the cost to repair and the contribution allowed for under the scheme.
“New Zealand will continue to experience damaging natural hazard events, so it is important to understand the risks in your neighbourhood and what you are covered for. and while these can be unexpected, what you’re insured for shouldn’t be.”
The scheme is a good contribution but not designed to cover all costs, Mitchell says.
3 Comments
"For each natural hazard event, the NHC pays a maximum of $300,000 plus GST towards rebuilding or repairing a residential home." So it covers some land and some improvements. Is the the old EQC levy?
eg Your house is just about totaled and there's been some heaving of the earth and footings or floor slab damage which requires re-instated earthworks and footing or floor slab strengthening or remedial work. The NHC should cover this up this up to $300k. The rest will be covered from your own house insurance.
For a while now, I've been thinking about home owner responsibility for potential natural hazard risks applying to their property. Cyclone Gabrielle and Esk Valley have sharpened my thinking on this.
NZ is a geologically young land mass. Big areas are made up of hills and alluvial deposit valley floors and plains. Natural erosion processes have been occurring since the land mass was created and will continue until a natural equilibrium is reached - long, continuous, geological time frame.
The maritime climatic influence will continue to deliver extreme weather events. Tectonic processes will continue to shape the fragility of underlying rock structures and vulnerability to land subsidence. Mountains and hills will direct rainfall run off into valleys, across plains, to discharge into the sea, carrying and depositing the products of the unavoidable natural erosion processes. Essentially all mountains and hills aspire to be flat.
Where is the capacity of people to look at the land they wish to build on and ask themselves: how has this land got to be what it is today? Esk Valley has a long history of periodic, big flood events, depositing deep, plain forming/lifting silt layers. That is how the valley floor has been formed.
Even if the territorial local authority has no power to stop an individual building a home on that land, surely the individual has a responsibility to ask them self, should I build here, given the inherent vulnerability.
That there has been a period of a permissive regulatory regime should not indemnify the individual from the consequences of personal action undertaken under that regime. A flood zone is easily recognisable. It's not rocket science.
Responsibilty of individuals to assess risk and consequence appears to have degraded to the point where individuals now hold the perspective that because I may, I can and any consequence of action I take is someone else's responsibility to protect and restore. I.e. privatise the benefit, socialise the consequences. This has to change.
Orderly retreat from recognised areas of particularly vulnerable to climate risk areas needs to occur. There are big costs associated with this. How is that cost to be met? There is going to be an inevitable, uncomfortable reckoning for a prolonged period of reckless development.
IMHO analysis of where benefits have accrued over time should be undertaken to arrive at an equitable sharing of cost.
Land developers and banks, I suggest, have been the greatest beneficiaries of housing developments in vulnerable locations over the last 3 or 4 decades. And on that basis share a responsibility to resolving the transition to more resilient communities.
Given the cumulative profit extraction by banks, I suggest that some level of debt forgiveness should be imposed on the most vulnerable properties. That way, the fall in capital value necessary to reflect the risks applying to those properties is shared between the parties that purchased and the banks that facilitated the purchase at values that did not reflect the inherent risk profile those properties faced.
I understand that banks are now placing much greater emphasis on the risks a property is subjected to. Good, going forward. But leaving the current owners enabled to pay inflated values in the past, carrying the can for the capital loss as values are adjusted downward as risks are formally recognised. Arguably, banks have extracted extortionate profits off those properties, through their role as enablers of lending.
Holding developers to account is a bit trickier as they will hide behind being permitted to undertake the developments by TLAs and an all care, no responsibility position.
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