Insurance Council supports thrust of EQC reforms

The Insurance Council of New Zealand supports the thrust of the reforms to the EQC Act announced by the Government today, but seeks a clear expectation that insurers should be responsible for assessing and managing claims for house damage.

“The high-level decisions announced today are good step toward creating a better scheme for New Zealanders” the Chief Executive of ICNZ Tim Grafton said today.

“There is acknowledgement of the increase to the EQC building cover to $150,000 ex GST.

“Most importantly though, the Government has listened to our concerns that some form of land compensation needs to be kept in addition to the building cover.  This means that where land damage has occurred separate funding to the building cover is available to fix the land or access to the property, so the house can be repaired or rebuilt.  Without these two separate sources of funding, there was a real risk in a city like Wellington, where there are many hillside properties that are likely to suffer land damage in a major earthquake, that people would not be able insure themselves adequately,” he said.

“The removal of contents insurance makes sense as the focus of the scheme should be on ensuring people can be rehoused after an earthquake, so private insurers will meet all contents claims and having a standard excess helps simplify the claims process,” he said.

“The area where we have some difficulty is that we believe insurers should be responsible for assessing and settling all house claims as we have largely been doing for the Kaikoura earthquake.    The worst outcome would be if the law requires all claims to be lodged with insurers, and then that information passed to EQC to assess the damage and manage the settlements for our customers.  Insurers are wanting to make this simpler and more efficient for their customers, not more complicated” he said.

“So, we would seek clear direction from the Government to EQC that insurers should be responsible for assessing and managing claims broadly based on the Kaikoura model.  This will ensure we avoid the situation that occurred in Canterbury where insurers are advised by EQC some years later that the building cap has been breached, and that they should now manage the claim” he said.

“Another issue we are keen to push is that the standard of repair that homeowners receive is the same as that in their insurance policies irrespective of whether the damage is above or below the EQC cap.

“We will have more technical discussions with officials on this and other issues, but we are pleased with the direction of travel and look forward to having legislation introduced before too long by the next Government,” he said.

Private insurers receive $1.8b Kaikōura earthquake claims

The total value of insurance claims for the 14 November Kaikōura earthquake as at 31 May 2017 is $1.84 billion the Insurance Council reported today.

Private insurers have received nearly 43,000 claims, of which over 31,000 are for residential properties.  Insurers are acting as agents for the Earthquake Commission (EQC) and are managing most of the residential building and contents claims.  These claims and costs do not include any land claims, or house and contents claims that EQC is managing for the Kaikōura earthquake nor where insurance has been purchased off-shore.

Insurance Council Chief Executive Tim Grafton said most is for commercial loss at $1.36 billion, with residential claims amounting to over $460 million.

“Progress is now moving at a rapid pace, so we have a high level of confidence that most people will have received settlement offers by the end of this year.   Forty percent of all residential buildings had initial assessments completed by the end of May compared with 32% in April and 19% in March.  Insurers continue to focus on the most damaged areas and are making pleasing progress with 57% assessed in the Upper South Island in May, compared with 45% in April” he said.

In terms of residential building settlements, 29% had been fully or partially settled by end of May compared with 21% in April and 11% in March” he said.

The time between assessment and settlement offer for residential properties is typically between 4 and 12 weeks depending on complexity.

For commercial claims, 62% of all material damage claims by number had been fully or partially settled by the end of May, compared with 57% in April and 44% in March.  In dollar terms, over $278 million of commercial material damage claims have been partially or fully settled.

Cyclones Debbie and Cook insured costs $84m

The two cyclones that pounded New Zealand during April and caused residents of Edgecumbe to be evacuated have resulted in insured costs of $84 million the Insurance Council of New Zealand reported today.

The tail end of Cyclone Debbie which passed over New Zealand between 3 and 7 April cost insurers $66.4 million followed closely by Cyclone Cook between 13 and 16 April at $18 million.  This brings the total to date for flood losses for significant weather events for 2017 to $135.5 million.

Insurance Council Chief Executive Tim Grafton said “We’re not even half way through 2017 and well on the way to one of the most damaging in recent years for extreme weather events”.

Provisional data released today has nearly 6,400 house and contents claims costing $61.6 million, 1,016 commercial material damage and business interruption claims at $16.8 million and 549 motor vehicle claims costing $4.8 million.

“The weather bombs we’ve had this year highlights the importance insurance plays when disaster strikes.  In towns such as Edgecumbe where there are significant numbers of residents not insured, the Government is sending all the wrong signals by increasing the cost of insurance” he said.

“Major increases in taxes and levies on people who insure their homes could see low income households not able to protect themselves from disasters” he said.

“Hikes in the earthquake and fire service levies means people with house and contents insurance will be taxed over $450 annually without even counting the 15% GST applied to the premium that the insurer charges” he said.

  Cyclone Debbie

3-7 April

Cyclone Cook

13-16 April

Total for both Cyclones
# claims $m paid # claims $m paid # claims $m paid
House and Contents 3,688 49.4 2,681 12.2 6,369 61.6
Commercial 521 12.4 495 4.4 1,016 16.8
Marine 17 0.2 10 0.04 27 0.2
Motor Vehicle 363 3.8 186 1.0 549 4.8
Crops 0 0 0 0 0 0
Other 47 0.6 35 0.4 82 1
Total 4,636 $66.4m 3,407 $18m 8,043 $84.4m

Government raises homeowner insurance premiums

Major increases in taxes and levies on people who insure their homes could see low income households not able to protect themselves from disasters the Insurance Council of New Zealand said today.

“By the end of this year households will see the levies and taxes on people who insure themselves sky rocket.  From 1 July there will be a 40% increase in the levy used to fund the fire service which everyone benefits from, not just the insured” Insurance Council Chief Executive Tim Grafton said.

From 1 November there will be a 33% increase in the EQC levy applied to house insurance.  And both these levies then have 15% GST applied to them.

This means people with house and contents insurance will be levied and taxed over $450 without even counting the 15% GST applied to the premium that the insurer charges.

New Zealand is one of the most vulnerable countries in the world to natural disasters for its size.  Insurance is vital in providing protection for people as we have seen with the industry likely to pay $25 billion for the Canterbury and Kaikoura earthquakes.

Grafton said “This election year there is an opportunity for political leadership to be shown.  Does New Zealand continue to go down the path of making it increasingly difficult for low income people to protect themselves or should we really be addressing our vulnerability?”

“If fewer people insure that will not only put upward pressure on the cost of insurance and so create a downward spiral, but it will also create a moral hazard for the Government.  Does it help the uninsured and thereby encourage greater levels of non-insurance and under-insurance?” he said.

“General taxation should fund the Fire Service which benefits everyone, insured and uninsured alike.  The Crown balance sheet is now strong and can bear the $1.75 billion exposure that the EQC levy seeks to fund.

“Crown risks to the likes of foot and mouth disease and pandemics are not specifically funded.  The challenge to future governments is to think how we can keep people protected from natural disasters.   All the evidence points to insurance as critical to economic and social recovery post-disaster.

Research commissioned by ICNZ shows only 25% of New Zealanders agree that New Zealand is well prepared to minimise the economic and social costs of natural disasters.

Tasman Tempest insured costs $42m

The storm that packed a month of rain into 24 hours has resulted in insured costs of $41.7m the Insurance Council of New Zealand reported today.  

The storm dubbed the Tasman Tempest hit Auckland and the Coromandel over 7 to 12 March 2017 with the township of Whangamata being hit the hardest. 

Provisional data released today has 5,800 house and contents claims costing $24.5 million, 760 commercial material damage and business interruption losses at $13.4 million and 315 motor vehicle claims costing $2.8 million. 

“The three weather bombs we’ve had in recent weeks highlights the importance insurance plays when disaster strikes.  We would hope that uninsured renters are now taking steps to ensure their contents are protected to see them through these types of events. And for homeowners that they check their sum insured is enough to rebuild in the event of a total loss” said Insurance Council Chief Executive Tim Grafton.

Upper North Island Flooding 7-12 March 2017 # claims$ M paid
Domestic 582424.5
Commercial Material Damage and
Business Interruption/Loss of Profits
76313.4
Marine (including Land Transit)12.5
Motor Vehicle3152.8
Crops
Other121.5
TOTAL7035$41.7

 Also, the 14-17 November 2016 final weather related losses for the lower North Island flooding and wind that immediately followed the Kaikōura earthquake brought 1,389 claims with $9.1 million paid out by private insurers. 

Costs for cyclones Debbie and Cook are not yet available.

 

 

 

Fighting misinformation

The Commission for Financial Capability is linking up with the Insurance Council of New Zealand to develop and run a programme for people in Māori and Pasifika communities.  The ICNZ is keen to improve engagement with at risk groups and so is putting $100,000 into funding the programme.

Tim Grafton, Insurance Council Chief Executive, said: "We chose the Commission because of their specialist knowledge on how to influence long-term behaviour change to improve levels and knowledge of financial capability in Māori and Pasifika communities."

Insurance advisory: Easter heavy rain expected for BOP

With up to 300mm expected to hit Bay of Plenty in the 72 hours from midday Wednesday, on an already saturated region, the Insurance Council of NZ is urging people in the region and throughout the country to be prepared for flooding.

“We want to help communities to reduce the risks they face.  If you can get as much of your home contents out of harm’s way, secure heavy outdoor objects and park vehicles in garages if possible” said Tim Grafton Insurance Council Chief Executive.

Pre-flood tips:

  • Move valuables from lower ground including electrical equipment if possible
  • Secure outdoor possessions
  • Have emergency equipment like portable radio, torch, mobile on hand
  • Keep your insurer’s contact numbers on hand

“Taking photographic evidence of the flooding and damage to your property will help with your claims assessment and if you need to move damaged or contaminated goods from your house for health and safety reasons” he said.

Tips for recovery:

  • Do not do anything that puts your safety at risk or causes more damage to your property
  • Contact your insurer, or insurance adviser. Do not be concerned if you can’t find your insurance papers. Insurers have electronic records and need only your name and address.
  • Avoid entering flood water, on foot or in a vehicle. Flood water can contain raw sewage and contaminants, can conduct electricity, mask hidden hazards, and pose a serious hazard to health. It may be deeper, or moving faster, than you expect.
  • Try to make the buildings safe and weatherproof but don’t make any emergency repairs unless it is safe to do so.
  • Don’t start non-essential repairs without your insurance company’s approval.
  • If water has entered the property, don't turn on your electricity until it has been inspected by an electrician
  • Do what you have to make your home safe and sanitary.  Remove and discard any water or mud-damaged goods that pose a health risk, such as saturated carpets and soft furnishings.
  • Take photos of damaged property to help speed up the assessments and claims process.
  • Do not drive your vehicle if it has suffered water damage

The extent of the insured damage will not be known for some weeks.

 

Edgecumbe insurance advisory: Temporary Accommodation

The Insurance Council of New Zealand advise people who have uninhabitable homes due to flood damage to contact their insurer directly for help with temporary accommodation.

Most home policies as well as contents policies provide cover for temporary accommodation.  Each policy wording will differ so people should check with their insurer.

Tim Grafton, Insurance Council Chief Executive said “people that are renting and only have contents insurance may not be aware that they probably will also have cover for temporary accommodation”.

Key points from Home policies:

  • Contact your insurer first – they must agree
  • The home needs to be uninhabitable due to loss
  • Covers you and your domestic pets
  • The choice of temporary accommodation needs to be reasonable i.e. a similar standard to your existing house
  • It doesn’t cover additional costs such as travel, letting fees, utilities, meals, phone, internet
  • You are covered, even if the damage to house is under $100k EQC cap
  • Limit of cover will be to a dollar value – each policy is different, so check
  • Some insurers will pay you direct and others you’ll get reimbursed –  discuss with your insurer
  • Some policies will also cover you where your home is otherwise safe and sanitary, but you are prevented from accessing it by order or direction of government or local authorities
  • Reasonable moving or storage costs are covered

To decide what counts as uninhabitable, insurers will assess on a case by case basis and are likely to ask questions such as:

  • Is the home safe and structurally stable?
  • Has a Government/Local Authority issued instructions for you to vacate the home?
  • Is the home secure against theft and outside elements (e.g. watertight?)
  • Can the kitchen and bathroom be used?
  • Can people sleep in the home?
  • Is there water? Electricity?

Key points from Contents policies

  • If you are renting and only have Contents insurance, check with your insurer as most insurers will cover your temporary accommodation
  • The alternative accommodation benefit will likely still require you to contribute your normal rent towards the cost
  • Damage may need to be caused to your contents to be eligible for the temporary accommodation benefit
  • Insurers will also pay for the temporary storage of your contents – including removal and returns.

Reasonable costs of emergency evacuation is also often covered in home and contents policies if the evacuation is due to safety concerns or other emergency and the police or a local authority has advised against you living in your house or you are unable to access your home.  This cover needs to be agreed in advance with your insurer.

Residential body corporates should contact their insurance broker, if they have one, or their insurance company directly.

Risk reduction insurance advisory: North Island heavy rain

With more heavy rain expected today and tomorrow as a result of the remnants of Cyclone Debbie, the Insurance Council of NZ is urging people in the North Island to be prepared for flooding.

“We want to help communities to reduce the risks they face.  If you can get as much of your home contents out of harm’s way, secure heavy outdoor objects and park vehicles in garages if possible” said Tim Grafton Insurance Council Chief Executive.

Pre-flood tips:

  • Move valuables from lower ground including electrical equipment if possible
  • Secure outdoor possessions
  • Have emergency equipment like portable radio, torch, mobile on hand
  • Keep your insurer’s contact numbers on hand

“Taking photographic evidence of the flooding and damage to your property will help with your claims assessment and if you need to move damaged or contaminated goods from your house for health and safety reasons” he said.

Tips for recovery:

  • Do not do anything that puts your safety at risk or causes more damage to your property
  • Contact your insurer, or insurance adviser. Do not be concerned if you can’t find your insurance papers. Insurers have electronic records and need only your name and address.
  • Avoid entering flood water, on foot or in a vehicle. Flood water can contain raw sewage and contaminants, can conduct electricity, mask hidden hazards, and pose a serious hazard to health. It may be deeper, or moving faster, than you expect.
  • Try to make the buildings safe and weatherproof but don’t make any emergency repairs unless it is safe to do so.
  • Don’t start non-essential repairs without your insurance company’s approval.
  • If water has entered the property, don't turn on your electricity until it has been inspected by an electrician
  • Do what you have to make your home safe and sanitary.  Remove and discard any water or mud-damaged goods that pose a health risk, such as saturated carpets and soft furnishings.
  • Take photos of damaged property to help speed up the assessments and claims process.
  • Do not drive your vehicle if it has suffered water damage

The extent of the insured damage will not be known for some weeks.

ICNZ supports IPSA review process

 

The Insurance Council of New Zealand welcomes the review of the legislation that regulates insurers that was announced today. 

The Reserve Bank of New Zealand is the prudential supervisor of insurers in New Zealand and operates under the Insurance Prudential Supervision Act (IPSA) with the purpose of promoting a sound and efficient sector and promoting public confidence in the insurance sector. 

“The Act was passed over six years ago, so it is timely in light of experiences since then and the pace of change in the sector globally to review matters. Ideally, the review should be conducted independently of the Reserve Bank, but the process they have outlined today provides plenty of scope for input,” Insurance Council Chief Executive Tim Grafton said. 

Insurers will have an opportunity to identify issues that they want to be considered and the RBNZ will review those and consult further on policy options that arise.  Further consultation will occur with an exposure draft of proposed legislative changes.  Any new law will not be enacted till 2018 at the earliest and the RBNZ has committed to a transition period to manage any changes. 

“It is pleasing to see that the RBNZ has identified potential issues to address that have been a concern to us such as contracts that appear to be insurance contracts but which are not.  An example is insurance contracts provided by some rental car companies.  Such contracts mislead the public and limit their rights,” Mr Grafton said. 

“This is just one aspect of many substantial issues the first phase of the review raises.  The Insurance Council will be consulting with its members to coordinate an industry response.” 

“We are also keen to see greater transparency and cost-benefit analysis around RBNZ decision-making,” he said.