Insurers want EQC Act overhaul (1)

11 November 2015

News Articles , Insurance Law

Insurers want an overhaul of the Earthquake Commission (EQC) Act to eliminate "inefficiencies, additional costs and delays" before another disaster strikes.

The Insurance Council of New Zealand (ICNZ) released its submission to Treasury's EQC Act review at its annual conference on Wednesday.

ICNZ chief executive Tim Grafton said the Act needed to be changed to "ensure people are re-housed as efficiently as possible after a natural disaster".

The rule that all claims be lodged and assessed by EQC "has not served homeowners well" and meant residents and insurers had to wait years to find out whether hundreds of claims were above the $100,000 cap, he said.

Proposed reforms to the Act, released earlier this year, suggested homeowners should lodge claims with their insurers, but left the assessment process with EQC.

ICNZ also wanted to take the lead on claims assessments and repair standards, which insurers said should be based on homeowners' insurance policies rather than the EQC Act.

This would "settle many areas of dispute", Grafton said.

Earthquake Recovery Minister Gerry Brownlee declined to be interviewed but in his speech to the conference said he was "cautious" about letting insurers manage EQC claims.

"Despite the view of some media commentators, EQC did a very good job of organising a large assessment and repair programme that created confidence that equity would be maintained for homeowners and inflation would not run way to predicted high levels," he said.

"Taking hold of the repair programme was important and I'm not keen to legislate for what could be a more diffused approach in a big event."

There needed to be more collaboration with EQC to "ensure the best result" and "to deliver a better claims experience for homeowners", Brownlee said.

Treasury is reviewing New Zealand's future natural disaster insurance cover, which falls under the Earthquake Commission Act 1993.

It received about 60 submissions.

Treasury's proposed reforms included an increase in the building cap to $200,000, which would cover both land and buildings.

Grafton agreed the cap should be increased, but wanted a separate cover for land-foundation works.

Having a single building cover could lead to a "severe risk of under-insurance that could leave people without a home", he said.

"No homeowner nor anyone else has any idea what the land-foundation costs will be after a major event like an earthquake on hillside cities like Wellington."

Brownlee touched on this issue in his speech, saying he agreed that interaction between land and building cover "needs to be improved".

In the submissions, there was also "near consensus" that EQC should no longer offer contents insurance and the Government agreed, he said.

Brownlee said he wanted to pass the law changes before the end of 2016.

Source -