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Insurers deny Labour Party claims a scrapped Government guide on cash settlements would have helped Cantabs get higher settlements ​

Insurers deny Labour Party claims a scrapped Government guide on cash settlements would have helped Cantabs get higher settlements ​

Insurers are swatting away Labour Party accusations the insurance advice booklet they lobbied the Government to scrap could have seen Canterbury quake claimants receive higher settlements.

The Government decided not to publish an 82-page booklet, aimed at helping Canterbury homeowners through the cash settlement process, which the Ministry of Business, Innovation and Employment (MBIE) and the Canterbury Earthquake Recovery Authority (CERA) spent seven months putting together from February last year.

Insurers: “Booklet has the potential to add millions of dollars to the cost of the recovery”

An email dated July 9 2015, and released to the Labour Party under the Official Information Act, shows the Insurance Council of New Zealand (ICNZ) told government and insurance representatives involved in the project:

“Feedback to the ICNZ from other insurers suggest that the publication of the booklet in this format could be a step backward in the settlement process which will result in increasing delays in the recovery.

“The incorrect and inaccurate information outlined in Jimmy’s [Vero’s executive general manager of claims] email will confuse people and create expectations of benefits that are outside insurers’ policy wordings.

“Insurers are likely to come under pressure to reopen settlements to pay additional benefits such as contingency sums…

“This booklet has the potential to add millions of dollars to the cost of the recovery as customers seek payments above and beyond their policy benefits. A significant portion of this through Southern Response settlements, would come from the government purse.”

Labour’s Canterbury spokesperson, Megan Woods, says this shows publication of the booklet could have led to higher settlements.

Insurers clarify booklet would’ve costed insurers by causing delays and disputes, not higher claims payouts

The ICNZ disagrees. Its chief executive, Tim Grafton, told

“The comments made about release of a generic cash settlement booklet adding millions to the cost of recovery referred to the delays and inevitable disputes that would result from customers believing that a government publication was advising them of entitlements that were not in accord with their actual insurance policies.   

“The comments made by ICNZ that the “booklet had the potential to add millions of dollars to the cost of the recovery as customers seek payments above and beyond their policy benefits” refers to the additional costs to insurers of delays and disputes, and not to higher claims payouts for customers.”

Opposition: The Government’s bowing to pressure from big insurers

Woods has put the onus back on the Government, saying the Minister responsible for the Greater Christchurch Regeneration, Gerry Brownlee, on Wednesday “stood up in Parliament and swore black and blue that the Government’s controversial insurance advice booklet was scrapped because it was ‘useless’.

“But emails from the insurance industry to the government reveal warnings that the information would have cost ‘millions of dollars’ in higher settlements, including from Southern Response.

“Gerry Brownlee is trying to hide the fact that his Government bowed from pressure from big insurers worried about their bottom line, and is now trying to claim that a booklet the government spent seven months and hundreds of staff hours on contained no useful information.

“He’s having to resort to throwing five different government agencies work under the bus rather than admit his Government didn’t have the guts to stand up for local people in the face of pressure from the insurance companies.

“It’s simple: if this booklet was so useless, why were insurance companies warning of the impact it could have on the government purse?”

Government: “Certainly not apologising” for the booklet not being published

Asked by Woods whether he’d apologise to Cantabrians for “bowing to pressure and scrapping a booklet that would have aided them to get back on their feet and get a fair deal” during question time, Brownlee said:

“Given that the book took seven months to produce and was totally useless, I am certainly not apologising for it not being published.”

He adds: “At the start, insurance settlements in Christchurch were at 83 percent. By the time it had finished, they had risen to 93 percent. As of where we are at the present, those insurance settlements are at 96 percent.

“The book itself was considered by those who reviewed it to be extremely confusing and likely to be most unhelpful.”

You can see a copy of the unpublished booklet released under the OIA here, and a copy of all the emails exchanged between insurers and MBIE/CERA officials here

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Insurers: “Booklet has the potential to add millions of dollars to the cost of the recovery”

Cost to who? - Certainly not policy holders ,I see this for what it is, Another in the long line of vested interest ring ins the National government loves to wheel out , in the absence of any actual evidence for the govts claims.

Every dollar not spent in Christchurch. has left policy holders and the city out of pocket.
Thank you John Key and the National government.


Well, after reading the released emails and having been embroiled in this debacle for the last 5 (almost 6) years I have a few observations:
1. It looks like the insurers initially were involved in and open to a cash settlement guide booklet and some took part in its creation (Southern Response, IAG).
2. Once the insurers saw the content they changed stance as an organised group (under ICNZ).
3. ICNZs view is that contingency sums that are a legitimate expense during construction are 'profit' for the homeowners (email from ICNZ). This view is not backed up by the facts or the courts findings relating to contingency sums.
4. They seemed to be concerned around their members liability for past claims that they had settled which may not have included (or included minimal) amounts for contingency sums.
5. They seem to have wanted to keep the claimants in the dark around the process.
6. They claim that the booklet would provide information to homeowners that is outside the policy, however they are commonly applying their own process which is outside the policy without homeowners understanding the implications of this.

In the above article the ICNZ claim that a lot of information in the booklet is not in alignment with the insureds policy. The problem they have around this statement is that the insurers are often not following processes that are within the scope of the insurance policy anyway. I have just gone over cap and been passed on to my insurer. They are a member of ICNZ. My insurer is following an out of policy process that more likely benefits them. They have not clearly outlined the process to me. They have provided me with no booklet or information around what my policy entitles me to.

Here is an extract from some case law on the matter (Parkin vs VERO).
"Vero submitted that following notification of a claim it carried out an assessment of the damage to determine whether it can be repaired, or whether the house may need to be rebuilt. That assessment is for its own purposes, and does not change the extent of its contractual obligation, or the onus on the insured establishing damage, or of taking responsibility for the remediation."
"Vero submitted that assessments and preliminary scope of works would normally be obtained for the purposes of dialogue between the insured and the insurer, and that it remained for the insured to challenge the insurer’s view of the extent of the damage, how it is to be repaired, and the cost."
What they are saying here is what I am experiencing. The insurer is inspecting the damage and proposing a remedial solution for the sole purpose of negotiating a settlement offer with the claimant. In doing this they are not briefing their experts to the policy standard (for remediation). They expect the homeowner to come back and point out problems with their approach, if they don't then then have made a financial gain.

I think there is a lot more to this story than ICNZ or insurers are letting on.


Contingency is not an automatic entitlement. The amount will vary depending on circumstances. In some cases such as a fixed price bog standard rebuild contract, no contingency risk exists. For more complex repairs contingency risk is higher. It is commonly included in cash settlements. In my experience of negotiating clients EQ claims, insurers are generally reasonable provided the cost escalation risk is accurately identified and not just a wishful thinking number plucked out of the air. Putting out a booklet that implies significant contingency is claimable in all cases, is misleading.

If you have evidence to support the allegation your insurers have not briefed surveyors in accordance with policy obligations, you have multiple options to challenge them. There is now significant legal and practical precedent on what constitutes ‘as new’. Worthy of mention that the court found for the insurer in Vero v Parkin.

There are a number of things wrong in this MBIE booklet eg. the chronically poor advice on P24 to reduce the reinstatement policy sum insured by the cost of repairs. This would leave many under insured, if followed. Always dangerous when amateurs think they are qualified to issue technical advice.


Contingency sums are a recognised amount allowed for in any building project. It is not acceptable that they are automatically excluded as some insurers have done in the past (when providing cash settlement offers). For simple builds they can be reasonably estimated. If they are not explicitly defined in the contract, then the contractor may have already covered that risk within any fixed price quotes. However I assisted an elderly couple in negotiation with their insurer where the cash settlement offer was based on a contractors fixed price quote. When questioned, the contractor admitted that they do not include contingency in their quote. When further questioned, they admitted that in this particular case they would expect a contingency of around 18-20%. The insurer was not offering this advice (or this additional amount), the contractor was not offering this advice, they were purposely withholding it and waiting for the claimant to ask. The result, roughly another $100k that the claimant weren't aware they were entitled to and that they would need when the repair happened. It only assists one party to withhold this information.

Of course I have evidence to support my allegation that the insurers are not engaging their experts to policy standard, they are quite open about it... I have a copy of their engagement instruction. The only reason they get away with continuing to do this is as most people are not aware of the cost implications of proposing remediation to a lesser standard. See Young vs Tower and how their reinstatement costs has escalated once the insurer is applying a policy standard, rather than just a code compliant one.


What probably alarmed insurers most was the repeated advice to know exactly what your policy entitlement is and to engage professionals to advise you. Apart from contingency amounts and restrictive scopes, insurance companies have managed to reduce their costs substantially because people have been unaware of what their full policy entitlement was.
Even had the brochure been issued last year, obtaining correct advice is not always easy. Quite a number of claims settlement consultancies have sprung up, many of them funded by insurers, and very few of which have the claimants' interests at heart. Money is the root of all evil, and a staggering amount is involved in this instance.


Neither you nor I know the extent of under or over settled claim values. There is little evidence to support your assertion that ‘insurers have managed to reduce their costs substantially’, apart from some stories posted online where people felt, rightly or wrongly, this had occurred. No doubt there are claimants who have genuinely been shortchanged but to state authoritatively that the practice is widespread without providing supporting data, is pure speculation.
All of the insurers advise claimants to obtain professional advice so why they would be ‘alarmed’ at a publication repeating what they were already saying, escapes me.
The only claims ‘consultancies’ funded by insurers are RAS and a couple of other optional advice services. None of the prominent independent EQ claims advocates are insurer funded and to claim they are in the insurers pockets is nonsense.


This is not the forum to provide evidence that many claims have been undersettled, but a look at High Court judgements suffices to illustrate the practice, e.g. cases where the plaintiff has been awarded substantially larger amounts than the insurer was offering. Outside of the High Court, I am aware of one case where the settlement amount was upped by a six-figure sum shortly before the court hearing, another case where a later assessment was a six-figure amount higher than a previous one. I have spoken to distraught homeowners who have been offered a five-figure sum for their property as a cash settlement after being put off for 5 years. These are not isolated incidents. This behaviour has been systematic on the part of insurers, who in many cases, will only advise claimants to obtain professional advice from the compromised bodies you mention. I am not aware of any "prominent independent EQ claims advocates" in Christchurch. When the full facts come out, as they assuredly will, this will be seen as a shameful chapter in New Zealand history.