Banks, insurers, homeowners sifting through quaqmire of information over red-zone pay-outs and insurance claims

Banks, insurers, homeowners sifting through quaqmire of information over red-zone pay-outs and insurance claims

By Hannah Lynch 

One week after Government's offer to buy-out the worst affected property owners in Christchurch, homeowners, insurers and banks are no further ahead as sort through a morass of information.

SBS communications co-ordinator Melissa Chilton (based in Christchurch) said the South Island bank was preparing an information package to help customers make an informed decision about which option to take and how to proceed.

Chilton said the bank had not yet worked through a red-zone buy-out offer for any of its customers and was focusing its efforts on developing supportive tools for them.

BNZ's Chris Gourley said the bank had set up its own earthquake team in Christchurch to work alongside Government. 

Gourley, head of retail for Southern region, said the bank was "geared" and "ready to go" after having received the NZ$100,000 EQC insurance pay-outs from earlier quake damage.

"The cheques got posted to us." 

Banks have rushed to the fore hoping to capitalise on the cash-flow. (See banking and finance editor Gareth Vaugah's piece of discounted mortgage offers for earthquake affected residents.)

AA Insurance head of corporate affairs Suzanne Wolton said insurers were ready to move on the red-zone pay-outs, but that home owners would first have to establish which option would be in their best interest.

"It's very much dependant on individual circumstances.''

After months of uncertainty about rebuilding prospects in some of the worst hit areas, Government last week announced an offer to buy up to 5,100 houses at 2007 values as part of a  NZ$1.5 billion support package. 

Homeowners have two-options: one where the Crown buys the entire property and assumes all insurance claims; the other where the Crown would purchase the land only, leaving homeowners to work out the rest with insurance matters on their own.

Which offer would be most attractive would depend largely on when the home was purchased. Homeowners who bought at the height of the market would find that the GV values would fall short of what they had invested in the home.

Red zone remedy?

Some affected homeowners aren't hopeful Government's red-zone remedy will ease their financial pain.

Interest.co.nz commenter "Chris J" is one of them.

In an opinion piece published last week, he pointed out that there were hundred of homes in the red zone area with little or no damage.

Those homeowners, would be forced to accept a buy-out at the 2007 GV values (because they we're not getting replacement insurance pay-out). In many cases, the GV bore no relationship to market value.

"Even worse some will benefit because of their GV's are whereas a large number will be much worse off.''

He said frustrations were mounting particularly with EQC insurance pay-outs in other areas still not having been received.

'Process complicated'

The EQC spokesman Gordon Irving said the commission was moving was quickly as possible to finalise claims but the process was complicated as a result of continuing seismic activity.

"Many claims cannot be closed as some homeowners have multiple claims for multiple events and have up to three exposures on each claim – building, contents and land. All damage must be linked to a specific event for insurance purposes and this is a complex and time consuming business."

Irving said the EQC fund was sufficiently capitalised that the commission's pay-outs were from its own reserves on not reinsurance at this stage.  Almost NZ$1 billion has been paid in earthquake claims since September 4 which equates to more than NZ$3 million in payments per day since the original 6.3 magnitude quake 10 months ago.

High court action

Among the many complications involved in insurance pay-outs is a dispute between EQC and insurers about second-round claims. In cases where pay-outs where already made, and insurance reinstates, EQC has agreed to accept subsequent claims. But for those parties who had submitted a claim but were not yet paid out, EQC had disputed to fold their claims into one.

The issue is to be heard by the High Court in Wellington in August.

The EQC deadline for logging a claim is 3 months after the event has taken place. 

Once EQC has agreed on an assessment then what happens with the payment depends on the nature and value of the damage.

For all claims under NZ$10,000 (except for structural and/or chimney damage) and all contents claims up to EQC’s limit of NZ$20,000 + GST, the registered owner will be sent a cheque.

Building claims between NZ$10,000 and NZ$100,000 + GST are being referred to EQC’s project manager at Fletcher Construction. 

EQC will pay them once the repairs are carried out.

Where a claim is estimated to be in excess of the maximum payout of NZ$100,000 + GST, then what happens to the payment depends on whether or not the claimant has a mortgage.

If you have a mortgage, the EQC payment for your house will be paid to your mortgagee not your insurer.  For further information see EQC's claims process.

If there is no mortgage the settlement will be paid to the registered owner. If there is a mortgage on the property, payments over NZ$100,000 + GST are paid to the homeowner. For damage above over the EQC cap of $100,000 (plus $20,000 for contents) insurers make up the difference.

For further information on basic claims see EQC's claims process.

For details on private insurance over the EQC cap click here.  

Other useful links on EQC insurance:

See interest.co.nz columnist Janine Starks piece on land value and home equity.

See also Janine's casestudy on under-insurance in Christchurch.

See also Janine's "7 reasons to stay insured" on a damaged property.

See insurance columnist Andrew Hooker's piece on reasons for caution with cash settlements

See also Andrew Hooker's piece on why EQC has dropped the ball

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

17 Comments

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OMG this sounds like it is going to run so smoothly..Banks have got there own EQC team, EQC have a team, Insurance companies have their own EQC teams, Lawyers have their EQC team, CERA,  my goodness it sounds like the money will flow so easily as the process has proven to be so robust up to now.......NNNNOOOOOOTTTT

Is it possible to claim ACC benefits for mental suffering caused by having to put up with the process?

Someone needs to start running this country properly for the good of the people, I reckon we need a good old fashioned military dictator!

Corporal Helen got the boot....!

Give Ron Mark a call . He'd do an awesome job , for the sheer challenge of it . ....... He was one of the great under-utilised talents of the previous parliament .

Yeap you can claim through  the NEW ACC EQC team they have set up...they have just had a tax payers conference in Fiji to go over their process, which in no way will align with any other EQC teams set up from the other 15 organisations involved.

 

So many "teams"...they are going to need a $7 billion dollar software package to go with about 5 million dollars of new computers...and a training conference in Queenstown...!

too right..and all outsourced to India..that was part of JK's trip  :-)

 

Funny you should post that FCM..just had a call from a sod claiming to be calling from the windows service centre...they hung up when I said they had reached Wellington central police station and would she please give her full....clunk.

http://www.trademe.co.nz/Community/MessageBoard/Messages.aspx?id=710851&topic=3

My Dads favouriteis a goodie.

"Sorry I can't help you I am deaf"

I actually only have oranges, whites and greens.  Although some of those greens look about the same as some of the reds.  So I'm probably in more limbo than being in red limbo.

I now regret not buying some reds a couple of months ago.  One vacant site with eqc claim still in play (house was demolished) sold for $30,000 in March by auction.  2007 GV was $129,000 - that would have been a nice little earner - 330% in 3 months that's over 34000% PA, oh.... the joys of Government intervention!

Unless it was bought by a Parliamentarian, they'll find a way to pay out only the price paid at the time of title transfer is my guess!

Don't forget, they're still working on the fine print according to what Sutton said at one of the community meetings if my memory serves me right.

 

 

 

Chris please ignore tor lawn. His seems to be the politics of envy and he's often barking up the wrong tree. I have lived long enough to learn there is no correlation either positive or negative between a person's wealth and the calibre of their character (or soul if you like).

I think you refer to the auctioned section in Dallington. If it came with an EQC (land?) claim attached the successful bidder was gambling perhaps on the land being written off. In which case, with no Government intervention, EQC would compensate the landowner for land damage according to a multiheaded formula laid down in legislation. Even if CERA strike down the Government options in this case, the EQC land claim is still valid. Some of us still believe in the rule of law, including the law of contract.

By all means wish you owned property in the red zone. Those there whose properties suffered the most damage, ironically, will by and large come out of this the best assuming they had full replacement insurance cover. Normally in a major disaster those most affected are the worst off, so the Chch event-response is somewhat counter-intuitive, and, I think, a bit farcical.

Our personal situation is getting interesting, though not without stress mind you. I chuckle when I think that my dear wife's long-held fascination with expensive wallpaper could turn out to be a very good investment for us and a very bad one for our insurer. Can't say I ever thought of it like that!

From the opposite end (I suspect) of the spectrum, I agree with Mr Lawn.

Pathetic, Chris J.

I offered you - genuinely and at no cost - help in whatever way I could, when you were hollering "somebody pleeeeease help!". As I did others. Hell, it could be my turn tomorrow.

Seems we have a different idea of 'need' and 'help'.

I didn't know you from a bar of soap, but having seen your comments above, I'd choose the lather.

 

PDK, I think you and Mr Lawn have misread the tone of my comment.

Firstly PDK, I would like to thank you for your offer of help.  That was when I was battling Civil Defence to stop them from crunching a 2 storey 150 year old villa in the CBD that we had owned for some years, without even giving us a chance to view or look at how to save it.  I asked that people see the insanity of what Civil Defence was doing.  (BTW The property is now just outside the "original" red zone and is still standing perfectly adequately).

Unfortunately the Civil Defence mentality just morphed into CERA so there are still many distressed property and business owners out there who have lost all control of their properties

My comment was intended to be sarcasm.  The sale I referred to demonstrates the unfair situation the Govt created by leaving owners in limbo for months, without direction or timeframes to repair land.  Here an innocent insured owner is left with taking peanuts for their property because of the indecision.  There was every expectation at the time of sale (given Brownlee and Key's earlier comments) that it could be several years before the land could be built on again - this made the land of little value.  It was a stupid and unfortunate mistake for the Govt to make.  Yet the blunders continue.

The CBD cordon and demolitions continue unabated.  Now red zoning residential creates the same sort of distortion, grouping unredeemable land with the only moderately damaged.

Regarding the earlier mentioned property (which was Rupert Pl in Dallington) sold by Ray White Real Estate with a declared reserve price of $30,000.  The property was advertised for several weeks with large advertisements in the Press and was sold with the EQC land claim included.  The owner was elderly and had already relocated to a retirement home after her house was destroyed (EQC used it in some of their videos of damage).  Her insurer settled on her claim, which I assume was an indemnity type of payout being market value less land value.  The market value at the time was obviously assessed as being very low so I hope that the owner's lawyer sorted out an adequate deal with the insurance company.  Anyway this cleared the way for the land to be sold at a very low price and with one bid sold at $30,000 (not to me).

If the Govt had come up with a solution earlier, these sorts of transactions would not have occurred.  Although plenty of people may well look at how to get their hands on cash in these situations - unfortunately this is what insurers are preying on and making low ball cash offers to close the deals.

Of course had I been prepared to buy such a property, I would have been helping the vendor by increasing the price (although as I'm not aware of what deal was struck with the insurer it may well have only profitted the insurer themselves).

I think we could perhaps give Chris J the benefit of the doubt and accept that his "regret" remark was intended to be facetious. I do think that it could be construed as being rather crass and in poor taste given the circumstances many Redzoners find themselves in through no fault of their own.

Mr Lawn I was tough on  you because I consider that you misconstrue Chris's complaints. Nowhere have I read him asking for a Government handout/bailout. To me he seems to be asking for no more than his contractual entitlements with insurers, without any unnecessary official interference. Just how much CD/CERA interference in private property and contractual rights is necessary on the basis of the wider public interest is a difficult call, and I doubt that you would argue that the bureaucrats get these decisions right 100% of the time. Easy to look at the big picture from a distance, not so easy when you are in the arena with a lot of what you have worked for on the line.

By the way I am not a property investor being only a part owner in our family home along with my wife (and, I suppose, the bank). The land I have invested in is the productive sort, forest land. Fluctuations in the land's market value, whatever that is perceived to be, are not a major factor driving our business decisions. I find myself in agreement with Chris J because I find his arguments cogent, not because I identify personally with his profession.

FYI

http://www.beehive.govt.nz/release/eqc-passes-1-billion-mark

The Earthquake Commission (EQC) has paid out more than $1 billion in claims for earthquake damage to residential property since 4 September last year, Canterbury Earthquake Recovery Minister Gerry Brownlee announced today.

EQC has received nearly 370,000 claims for the 13 separate events since September, including more than 22,000 for the aftershock on 13 June.

“This shows significant amounts of money flowing to claimants,” Mr Brownlee said.

“EQC has paid an average $3 million a day, and expects that level of payment to increase significantly.”

Since last week’s announcement of residential zones EQC has been continuing with its residential building assessment work.

EQC is on track to meet the time frames set in March for the full assessment of properties. Full assessments for severe structural damage should be complete by mid-July; while all other assessments should be complete by the end of the year.

Mr Brownlee says EQC is working hard to provide certainty to Christchurch residents as soon as it can.

“EQC is close to finishing assessments of properties that are now classified as being in the residential red zone. They will then turn their attention to those in the orange zone and give people in those areas as much certainty as possible.”

The 5.7 and 6.3 magnitude earthquakes on 13 June caused further land damage in the Port Hills area (including Lyttelton). In response, EQC is currently conducting rapid land damage mapping in the Port Hills. The resultant mapping will allow EQC to triage appropriate areas and deal with urgent claims appropriately.

Teams of EQC geotechnical engineers from the Land Damage Assessment Team (LDAT), managed by Tonkin & Taylor, are physically observing land damage and recording it on maps of the area.

An overall picture of area-wide land damage will identify properties that require urgent attention. It will be followed by individual property assessments for properties with EQC claims.

“EQC anticipates 70 per cent of this mapping to be complete by the end of the week,” Mr Brownlee said.

EQC is one of a number of organisations working with the Canterbury Earthquake Recovery Authority (CERA) on rebuilding greater Christchurch and its surrounds, and supporting the welfare of its residents. For more information visit www.cera.govt.nz