Insurance Council on why it's taking so long for quake claims to be settled; highlights inaccuracies in govt data on the matter

Insurance Council on why it's taking so long for quake claims to be settled; highlights inaccuracies in govt data on the matter

The Insurance Council of New Zealand's chief executive, Tim Grafton, has responded to an opinion piece Christchurch accountant and insurance advocate, Cameron Preston, has written for Interest.co.nz.

By Tim Grafton

Cameron Preston’s guest post of 18 July 2016, while trying to prove a point actually shows how myths develop in a complex world. And while the use of numbers can be used to suggest evidence for a view, I’d like to present a case for a different conclusion, and ask for readers to consider the following.

Mr Preston says he draws on ICNZ and EQC data to support his case. If Mr Preston had approached either ICNZ or EQC then he would have been helped to understand the discrepancies in the figures and not concluded that there are 2,096 families missing in some tug of war between EQC and insurers.

So, to the facts. The ICNZ data is collected in conjunction with MBIE (previously CERA from 2013-16) who collect data from insurers and EQC.

The data collected in 2013 incorrectly showed that at one point 24,660 properties had been transferred to insurers as over cap. Subsequently, CERA worked with EQC and insurers to improve the quality of data collection. As a result, the number of over cap properties transferred to insurers by 31 December 2013 was corrected to 21,962 (see ICNZ media release). Noted in that release that the CERA data indicates that there were over 2,600 dwelling claims which are still undetermined whether they are over or under cap.

The most recent publicly available figures (as at 31 March 2016) show insurers have had 25,753 transferred as over cap. This means an additional 3,791 properties have been transferred from EQC to insurers since 1 January 2014.

Delays for both EQC and insurers have occurred for many reasons beyond their control.There were over 11,000 quakes and after-shocks which meant that major repairs and rebuilds could not start till mid 2012 almost two years after the first quake – the last major quake was December 2012 and that was followed by CERA classifying the land by degree of damage and MBIE setting new guidelines for building on damaged land, all of which occurred April-June 2013.

The Courts had to clarify how the EQC Act responded to multiple events in the same insurance period determined that for each major event costs had to be apportioned between EQC and insurers. That complicated the assessment process and also led to duplication of work. Total replacement policies as opposed to the prevalent sum insured slowed processes and further Court clarification was needed on how the EQC Act responds to land more vulnerable to flood and liquefaction following earthquakes.

Delays occurred in 2013 in the city council’s consenting system which eventually lost its accreditation for many months. Un-reinstated retaining-walls prevented homes on hills getting consents and this arose because people either had not insured those walls or could not afford to repair them, but that affected other people’s properties. There were complexities raised by multi -unit building with shared walls, foundations and ceilings where there were a mix of insurers and uninsured, and where neighbours’ disputes complicated agreement on how to proceed.

However, it is equally true to say that insurers cannot progress matters for their customers till the property is transferred from EQC to them. This is why we have argued that in future all claims should be lodged with insurers and assessed by them, so the most badly damaged homes are identified up front.

The other major flaw in the rationale of the opinion piece stems from the understandable error made in assuming the pie chart on EQC’s website was correctly labelled. The chart shows that as of 6 July 2016, EQC had resolved 27,849 over cap properties, when in fact it should have shown these as properties in respect of which the damage is in excess of $100,000. That does not necessarily mean the property is ‘over cap’ because of the impact of multiple claims per property.

The difference between properties and claims is critical to understand. In Canterbury, there were several major earthquakes and for each one the High Court determined that EQC was liable to pay up to the $100,000 ex GST cap.

This meant that some properties had more than one claim for $100,000 attached to them. As a result, there is a difference between the number of properties insurers report to MBIE and the number of properties EQC identifies that have claims that cumulatively exceed $100,000 damage.

Of course, this does not mean that 2,096 families are lost and in fact those claims have been resolved by EQC.

So, insurers have not been refusing their liabilities from EQC. On the contrary, they have been seeking to get their total liabilities transferred over as quickly as possible so they can settle and remove liabilities off their balance sheets. Any inquiry of financial analysts who have followed the impact of Canterbury on insurers will support the view that delay is the very last thing anyone with commercial nous would do.

Nor have insurers been dragging their heels on reinstatement works. Cash settlement of residential properties has not been devised to provide ‘low ball’ offers. Cash settlement involves the insurer working with the insured to determine best estimate rebuild/repair costs and by cash settling it enables people to move on with their lives instead of waiting in the insurer’s rebuild queue.

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?

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Mr Grafton says Cameron Preston is promulgating a myth, but that's exactly what Mr Grafton is doing. Multiple ones, in fact:

*Mr Grafton would love us all to think that it's only the really complex stuff like MUDs and hill properties that are left. Not entirely! As attested by my little box on flat land that has been overcap for 4.5 years. I know others with equally simple properties that are non-hill non-MUD but still stuck in this awful quagmire. And I don't mean the quagmire of TC3 land.

*What does Mr Grafton mean by "major quake"? If he means magnitude 6+, the last one of those was December 2011, not December 2012. If he means magnitude 5+, the last one of those was six months earlier than he states, on the 25th of May 2012. The worst of the sequence (the 6+ quakes) was over by the end of 2011, not 2012. So taking minor, insignificant quakes out of the equation, EQC and the ICNZ insurers have had half of 2012, all of 2013, 2014, 2015 and now 2016. That's four whole years.

*MBIE delayed settlements by "setting new guidelines for building on damaged land, all of which occurred April-June 2013". No, that process was in 2012, not 2013. My wife and I followed that process closely, being on TC3 land and all. The first version of the guidance was published in April 2012, and EQC land reports were published in July 2012.

*That private insurers were reinstating houses at a fantastic rate was a myth promulgated by ICNZ's press release of the 1st of February 2016, where they said "Nearly 5,400 major repairs and rebuilds were settled in 2015 which reflected a 21% rise in the settlement rate last year compared with 2014." Which has still not been corrected on the ICNZ website to state that the 5000+ was the total from 2010 onwards, not just what they achieved in a single, remarkable year.

*As for the High Court delay and the whole apportionment business, that was initiated by insurers, not by the EQC.

As for Mr Grafton's statement that "The other major flaw in the rationale of the opinion piece stems from the understandable error made in assuming the pie chart on EQC’s website was correctly labelled", well, okay, EQC data cannot be relied upon. We all cry with you, Mr Grafton. But on the basis of the points above, it's a bit pot calling the kettle black from you.

Mr Grafton, can you please explain why your press release dated 12 February 2014 states:

http://www.icnz.org.nz/over-10-billion-paid-out-by-insurers-for-canterbu...

"Insurers have 21,962 Over Cap dwelling claims of which 9,119 have been fully settled and completed"

(which is a 41.5% settlement rate)

however your press release dated 24 February 2014 (only 12 days later - the one you refer to in your article above) states:

https://web.archive.org/web/20150114140951/http://www.icnz.org.nz/thousa...

"By the end of 2013, some 16,900 or 86% of the 22,000 over cap residential dwelling claims had either been fully settled and there are thousands more in the pipeline to meet the end of 2016 target”?

How did you your industry double their settlement rate in 12 days?

And while you are at you also said back then:

"1,494 insurer-managed rebuilds and major repairs had been completed.....There’s a further 8,468 insurer-managed major repairs or rebuilds that are either in the design-documentation stage, have builders hammering away or are in the schedule,” says Mr Samasoni.

That's a total of 9,962 that were either finished or in progress back in 2013, however now, in 2016, your industry have only completed 5,000?

That looks like cooking the stats and delaying on purpose to me, but of course that is just my opinion...

Cam Preston

Why exactly did the inception of zoning delay assessments. We all know Insurance companies do not insure land, such as has been those in the red zone, therefore their only liability is for the structural damage to the house. So why did they not just go out and assess the damage? Damage is damage for heavens sake, go and look at it, that's what you are up for and that's what you sell your policies to cover. Don't try and say a few retaining wall here and there on the port hills held the whole city to ransom.Why did insurance companies have to wait for the MBIE guidelines when they knew their own policy wording over arched those guidelines and made them irrelevant .Everybody is to blame,EQC,CCC,CERA, & all those nefarious ,greedy almost criminal claimants wanting their policy entitlements, not a word though, according to Mr Grafton it seems, that any one of the Insurance companies have ever put a foot wrong. What a squeaky clean lot they are indeed!

It is not just Earthquake, it is all kinds of insurance. Prevarication and delay is their strong point. But they fail to see we can vote with our feet and never, ever, ever give em a Premium again. Once bitten thrice....shy.

And that is just what I am going to do with the unhelpful people who want my premiums, but do not want to ever have to held to account. And prevaricate at every turn and nuance under the Sun, under the reinsurance banner and for all time.

I am in the throws of such a problem with the Largest bullshitters in the World.

If they do not come to the party, I will be spreading the word far and wide and they will lose more than just me as a customer. And it will not be pretty.

They can screw the public, just once too often, then it is time to fight back.

Nothing new, but just ask a Christchurch Resident how they feel. They should all band together and hold them all to Account.

In fact, We should avoid all the Current Insurance People like the plague and organise a new regime that actually does what they advertise, Not what the small print obfuscates about.

And I used to be one of their best customers...but never, ever, ever will be again.

The odds are against me winning, but the payback, will be immense. And as usual, it is Bank and the Insurance Company, who think they will win, But being a Premium, Premier, silly old bastard, they will lose out in the long...run. Never screw over your best customers...it never pays in the ......f-end.

Nuff said.

Mr Grafton is of course spinning a yarn attempting to maintain the confidence of the wider insured populace, frankly disgusting.
Why are there so, so many vulnerable people still waiting for their rightful insurance entitlements this far on?
Would anyone really take out natural disaster insurance on a house and then expect to wait nearly 6 years to be settled?
Imagine what that would do to you? Elderly couple living in a broken house or perhaps people with young children, unable to move on or to improve anything but instead left, not knowing your financial future, all plans in tatters and yet now still in limbo 6 years on with the earthquakes a distant memory! It is truly disgusting. The toll taken upon a few thousand people who have expensive rebuilds and repairs, and with all the cheaper, statistic grabbing gib crack fixes done, often badly! but boasted as some great achievement by EQC and ICs.

The Govt and the Insurance industry have pulled an absolute blinder down here. They have done a great job of containing the bubbling truth within the confines of Christchurch. What a fantastic ruse they have got away with while cleverly indicating to the wider insured populace that its all been very complicated and there are just some carpers and moaners left.

What exactly does being fully insured mean here in NZ? Well until you enforce it, it means very little!

I suggest policyholders must learn that large insurance claims are adversarial by their very nature, where the insurer minimises or delays your entitlement attempting to wear you down into submission in order to just move on with life. An essential primary tool in this war is a solid track proven insurance lawyer.
I suggest that claims must be prosecuted with vigour from the outset through the only effective method,
the judicial process.
Kiwis are not used to this concept and are reluctant to invoke their legal rights. Instead foolishly believing that the Govt and ICs will automatically or eventually do the right thing, massaged by the above vulture like propaganda and hype convincing them so!
I found that my IC behaved just fine on the eve of a high court trial, up until then they tried everything under the sun to avoid my just settlement.

Mr Grafton, why is a loss adjustor of your institute's member, IAG, using delay and deny tactics on us, a vulnerable couple grieving the loss of our beautiful daughter by suicide? Our rebuild has finally got practical completion but cannot be safely occupied due to a large retaining wall and entrance steps yet to be built. The LA had previously verbally commited to building the steps (left off the original scope which i was not allowed to see till several years later) but now today in an email seems to be denying this. Her response came after the consultant we have had to hire out of our own pocket for liaison, fairly reasonably asked to see a contract for said wall (which at least is going ahead) and steps. What we are being put through in lack of clarity and transparency at each stage is just bizarre and I think even IAG's ultimate owner Warren Buffet would be aghast.

My neighbours across the road have not even had a offer, yet. Both are over 80, vulnerable, and are waiting for AA. Over cap for five years.
Tower has lost in court too many times, check out the crap they have tried to pull.
I am with Southern no response, six years now. They will not engage with my QS even though they stated I should get a QS report so they could. To court!
Insurers just loved writing those policies, and getting the cash. But they do not want to honour them.
My Grafton, you are a paid mouth piece. Spin, spin and BS.