Insurance Council supports exemptions from Fire Service Levy

The Insurance Council of New Zealand is supporting the decision by the Government to exempt travel insurance and insurance on certain types of property from having to pay the Fire Service Levy.

“While we oppose the policy of taxing people who insure themselves to pay for the public good provided by Fire and Emergency New Zealand, we are pleased to see common sense reign on the decision to exempt travel insurance as well as other insured property like swimming-pools, water pipelines and tanks from the tax,” Insurance Council Chief Executive Tim Grafton said.

“Without this decision, people who took out travel insurance to holiday overseas would have been taxed even though there was no way the FENZ would have provided any service at all.  Ironically, most people buy travel insurance to cover themselves for health costs, theft and cancellations none of which involve the FENZ,” he said.

“The need for this exemption arose because the Act now requires any insurance policy that covers people for material damage to property to pay the tax.    Travel insurance does cover people for damage to property amongst many other things” he said.

“We now expect a similar common sense approach to apply to liability insurance which provides cover for any loss, not just material damage, to third parties” he said.

Background:

Parts of the FENZ Act came into force on 1 July 2017.  These latest decisions on exemptions by government give clarity to property owners and insurers and are an important step toward the new funding regime which comes into force on 1 January 2019.

How New Zealand Adapts to Climate Change Needs Stronger Push

The Insurance Council of New Zealand says the Parliamentary Commissioner for the Environment’s recommendations on long-term planning for climate change fell short in not dealing with how New Zealand should adapt to climate change.

“The Commissioner’s report Stepping Stones to Paris and Beyond borrows extensively from the United Kingdom’s approach to addressing how to mitigate climate change.  This legislates greenhouse gas targets and requires that they be met through five-year carbon budgets set by the Government and on advice from an independent expert group” Insurance Council Chief Executive Tim Grafton said.

“What is surprising is that while the Commissioner is willing to push the boat out to recommend similar legislation to reduce New Zealand’s greenhouse gas emissions, she pulls up short in making a recommendation to legislate such long-term planning for how New Zealand adapts to climate change” he said.

“It was not long ago that the Commissioner’s report on sea level rise concluded that no matter what was done about mitigating greenhouse gas emissions, sea level rise was inevitable.”

“This means no matter what New Zealand does about greenhouse gas emissions, it faces inevitable challenges in adapting to climate change and sea-level rise.  Adaptation means reducing and managing the risk of losses which will be essential to keep insurance available and affordable if losses become unsustainable.”

“Given this certainty, it is puzzling why Dr Wright did not also recommend that legislating, as the UK does, for five-yearly adaptation assessments by an independent expert group.  Instead, she has taken the weaker stance of recommending that officials who report to Ministers carry out the work and that the current Minister’s Adaptation Working group examines what the UK does.”

“This offers no long-term, bipartisan approach to the problem.   It leaves matters solely in the hands of the current Minister and her working group.”

 

Flood insurance update: 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.

“Reports in today suggest that some people may be displaced from their homes for quite some time and in some areas of the South Island it may take two to three weeks for the water to recede” said Tim Grafton Insurance Council Chief Executive.

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.

“People that are renting and only have contents insurance may not be aware that they probably will also have cover for temporary accommodation” he said.

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.

Insurance flood advisory for Otago and Canterbury residents

With heavy rainfall expected in Dunedin and parts of Canterbury receiving up to 180mm before noon Saturday, the Insurance Council of NZ is urging people in the region 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.

“With the rest of the country experiencing power outages and disruptions over the last few days we recommend turning off at the wall as many electrical appliances as possible to avoid damage in the event there is a power surge” he said.

Pre-flood tips:

  • Move valuables from lower ground including electrical equipment if possible
  • Secure outdoor possessions including outdoor furniture and trampolines
  • 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.  When cleaning, wear a mask, gloves and overalls to minimize exposure to possible hazardous materials.
  • 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 for this weather event will not be known for some weeks.

 

Private insurers paid out $0.5 billion Kaikōura earthquake claims

Private insurers have paid out over half a billion dollars in claims from the 14 November earthquake, with $108 million paid to customers in the month of June, the Insurance Council reported today.

“Progress is moving at a rapid pace and we have a high level of confidence that the majority of people will have received settlement offers by the end of this year.   Fifty one percent of all residential buildings had been assessed by the end of June compared with 39% in May, 32% in April and 19% in March.  Insurers continue to focus on the most damaged areas and we are pleased that assessment progress is at 73% for the Upper South Island as at end of June” said Insurance Council Chief Executive Tim Grafton.

Private insurers have received over 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 building and contents claims.  These claims and costs do not include any claims that EQC is managing for the Kaikōura earthquake nor where insurance has been purchased off-shore.

The total value of insurance claims for the 14 November Kaikōura earthquake as at 30 June 2017 is $1.88 billion with most of the losses in commercial claims at $1.39 billion, with residential claims amounting to nearly $474 million.

The Upper South Island is north of the Waimakariri River and takes in Hurunui, Kaikōura and Marlborough districts.

In terms of residential settlements, 36% had been fully or partially settled by end of June compared with 29% in May, 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.

For commercial claims, 67% by number had been fully or partially settled by the end of June, compared with 62% in May, 57% in April and 44% in March.  In dollar terms, over $363 million of commercial claims have been partially or fully settled.

As at 30 June 2017 Received Settled & Partially Settled
# $ # $
Domestic – Buildings 31,624 446,108,071 11,476 139,468,912
Domestic – Contents 7,135 27,733,050 3,882 11,964,578
Commercial 3,792 1,387,948,705 2,555 363,705,409
Marine 135 9,713,478 118 5,250,925
Motor Vehicle 627 1,719,472 498 1,346,997
Other 57 3,577,367 45 331,010
TOTAL 43,370 1,876,800,143 18,574 522,067,833

Tasman Tempest insured costs upgraded to $62m

The storm that packed a month of rain into 24 hours has resulted in insured costs of $61.7m 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 in May had 7,035 claims costing $41.7 million and the final data has now upgraded claims to 7,774 and costs to $61.7 million.

“The weather bombs we’ve had in recent months 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 6,449 37.03
Commercial    896 20.89
Marine (including Land Transit)     14     .11
Motor Vehicle    354   3.12
Other      61     .53
Total 7,774 $61.68

 The final costs for the March flood bring natural hazard events for 2017 to $174.7 million.

Panel beater skill shortage causing collision repairs delays, not insurer red tape

A panel beater skill shortage is causing delays in repairing insurance customers’ cars, not insurer red tape, the Insurance Council reported today.

“Neil Pritchard from the Collision Repair Association’s (CRA) claim that bureaucracy is slowing down car repairs is an empty beat up to disguise the failure to address his industry’s skill shortages” said Insurance Council Chief Executive Tim Grafton.

“He has a short memory because earlier this year his organisation approached the Insurance Council to partner in joint communications regarding their skills shortage causing delays in car repairs.  Pritchard is creating tension between the smash repair industry and insurers that is unnecessary” he said.

The unfounded allegation insurers are slow to process vehicle claims is inconsistent with CRA’s own research that insurers received recently that shows an improvement from the previous year in the score for the claims process.

“The CRA needs to wake up to the real issues with delays in repairs.  They need more skilled staff who know how to work with high tech cars and they need more staff in repair shops in the major cities where we have seen an increase in both cars on the road and crashes” he said.

“There will always be cost negotiations between panelbeaters wanting more profit and insurers wanting to keep costs down so that insurance remains affordable for everyone.  All insurers are asking for is the evidence of the damage to support the recovery of the costs which is no more than any other business requires when paying for services” he said.

Insurers have strong relationships and trusted panelbeaters as part of their authorised repair networks.  Some insurers have set up exclusive repairer arrangements where the repair shop can self-authorise claims which speeds up processes and means no insurer involvement.

Insurance Council supports new meth standard

The Insurance Council of New Zealand supports the new standard for methamphetamine contamination, sampling and testing announced recently by the government. 

“There are numerous conflicting messages about meth contamination and insurers have seen increasing numbers of claims from property owners who are faced with levels of contamination from tenants passively smoking P right through to contamination from meth labs” said Insurance Council Operations Manager Terry Jordan. 

The science relating to the health effects of meth contamination isn’t clear and internationally, there is a wide range of measures and different standards, defining when a property is safe to re-occupy following meth contamination. 

“On balance, insurers support the increase from 0.5µ/100cm2 to 1.5µ/100cm2 which better reflects the current scientific understanding of the health risks of methamphetamine” he said. 

With the requirement in the new standard for sampling and remediation companies to be independent from each other, the Insurance Council believes there will be less room in the market for the “cowboy” clean up companies that prey on the fears of tenants and landlords.  

The objective of the standard is to identify methods of testing properties that provide reliable results and identifies decontamination and remediation processes that are effective and enables properties to be safely reoccupied in a cost-effective manner.

Claims for meth contaminated properties have been steadily rising in recent years and are now estimated to cost insurers in excess of $30 million per year or 100 properties per month. 

Insurers coverage of losses from methamphetamine contaminated properties ranges from exclusion, to increased excesses, to coverage but with sub-limits, to full cover but with requirements for checking tenants and undertaking regular property inspections. Some insurers are reviewing their policy wording to clarify contamination levels that relate to losses.  

Property owners need to be made aware of the requirement to disclose methamphetamine contamination in the properties to their insurer.

 

 

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.