By Andrew Hooker*
Since the February earthquake that devastated both the CBD and other parts of Christchurch, we have received intermittent updates from the Earthquake Commission and insurance companies on the status of assessing claims.
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*Andrew Hooker a lawyer specialising in insurance law and a director of Claims Information Specialists Ltd, running an insurance information web site www.
22 Comments
I completely agree.
NZI has not dealt with a single one of our claims despite alerting to the fact on Sept 6 2010 that one property (about $800,000 replacement value) was virtually destroyed on Sept 4. Assessors were sent out, but to date no other contact let alone money or a plan to repair even discussed after nearly 7 months despite hounding.
The only solution is penalties for the insurance companies. If claims are not settled within six months they should be forced to pay the claimant penalty interest of 15%PA or similar on top of any claim.
The situation between EQC, the Fletchers scheme, insurers, Civil Defence and the Government is all so ludicrous and hopeless that people are being very tempted to walk away and leave the problem to their banks.
Incompetence and disorganisation is rife and no one seems to care. Payouts could be virtually instantaneous if the insurance companies wanted to. There are tens of thousands of houses that are no questions asked in need of a rebuild. Why not just make a provisional payout to the property owners banks' at say $1200/m2 of insured floor area and sort out the finer points about the total payments later.
EQC and therefore the Government are to blame for so much of the problems and all we get is excuses.
Look at the Red Zone cordon which is absolutely ridiculous about half the cordoned are is totally safe to access. If you don't want the public in just restrict it to owners, tenants and their contractor's.
Bureaucrats are strangling ChCh and therefore NZ too, most sensible people are ready to run not from the quakes but the idiots in charge.
Chris - you say:
" .... most sensible people are ready to run not from the quakes but the idiots in charge."
Sadly I heard same today. It's this kind of thing too, as commented on before:
In other words, safe enough for demo contractors to enter building before demolition, but not building, or business owners.
Is it a lack of communication? Or, and, a lack of control? Why?
Cheers, Les.
Perhaps this has been tried and failed, but I just wouldn't carry on hounding - what I've always found with any bureaucracy (be it government or corporate) is that polite hounding is a waste of time - charging headlong into their complaints process ends up getting priority in terms of action. It's the old paper shuffler syndrome - they respond so well to it!
The sooner one lodges a formal complaint the better. But to get to the stage of being able to lodge a complaint with a third-party authority - one first has to lodge an official complaint (and go through their specified internal complaints process) with your individual insurer. Each insurer will have a formal process and stated timeframes under which they must respond to that formal complaint. Then (if not resolved to your satisfaction within the specified timeframe) you have come to a "deadlock" - and you get a letter from them stating there is a deadlock. Then you can commence the third-party complaint process.
This brochure explains the process;
http://www.iombudsman.org.nz/sites/default/files/pdf/How-Can-We-Help.pdf
and one specific to Christchurch has also been prepared;
If your insurer is not a participant in the ISO scheme, then the complaint must go to www.ombudsman.parliament.nz
So, if I had been delayed in my claim (whether my insurer were blaming EQC for the delay or not) I would be notifiying them (the private insurer) in writing of my intention to commence their internal complaints process - and fill in their form - as soon as one month post assessment had passed without any money/repairs happening.
Thanks Kate, but I rang the ombudsman on a previous claim issue in 2009 (a fire at property, we have 40 odd properties around NZ so these things do happen, it was our first major claim in 15 years though). We had huge delay from the insurer as they claimed they waited on engineers and quantity surveyors and every other excuse.
The ombudsman's office told us until a settlement had been reached we could not make a complaint, which I thought defeated the purpose. In the end we took a settlement that was ok but not enough to get someone to go in and do the repair. The reason for that is that because the property was in flats, the insurer insisted we would need to bring the building fully up to fire codes and that the extra work would be at our expense, hence if we got the insurance company (AMP by the way) to fufill their full replacement policy we would need to contribute perhaps an equal amount to do the upgrades.
So in the end we took the cash (about a third more than we bought the place for) and boarded up the house. So we have a damaged house on half an acre that cost us nothing and the city had 4 less affordable flats, not the best outcome but it was the insurance companies fault.
The same is going to happen all over the place with the earthquake, we are already pretty much coming to the realisation, no one has the ability or leadership to make things happen any quicker or better so we are already considering boarding everthing up, selling what we can and leaving New Zealand.
Being dealt with, the way we have by Civil Defence wanting to pull down our buildings, insurance companies doing nothing, and by EQC claiming that Sept 4 damage was exaggerated when Feb 22 proved the damage and nearly killed some of our tenants in properties that EQC said were safe, is all too much.
My brother has flown to Australia to consider options (just a coincidence it's Grand Prix weekend) and I may well consider it soon too. ChCh is stuffed and immediate reassurance and action was needed instead we've got stonewalling and abuse.
Government and bureaucrats are to blame.
So far we've got nothing but good things to say about our insurance company, State. Supposedly they were once one of the worst, but that's definitely not the case now!
They took less than 7 days from our first call to get us back in our damaged home - and they managed the whole temporary repair process for us. Considering this is probably the biggest ever insurance event in this country, we considered it pretty impressive. Compared with people we know with other insurance companies, who were simply told to 'call EQC'.
Given that you have to have standard insurance to have EQC cover anyway, they should really just run it all through the standard insurance companies, and have EQC providing the financial and logistical backup from the rear, with minimal public contact. That way the public could just deal with their insurance company as usual, as we have, rather than to-ing and fro-ing between them, which wastes everybody's time.
If you'd gone 'halves' with your neighbour in buying a car, and it got wrecked, and you boith had to chip in to repair it. Would you just let him 'get on with it' and give you the bill for 'your share' after it's fixed? Or would you want to see the car first, and make sure you got the repair bills settled equally?
Sure, if the damage was appropriately documented, and the assessments and repairs done by qualified and trustworthy personnel. In particular if we were talking about many cars I'd probably spot-check the processes of a number of them to make sure everything was in order.
If I were particularly paranoid I'd probably have my neighbour arrange a time where his and my own assessor could check the damage at the same time and agree on the assessment. And I'd want to see and agree with the repair bill at the end. But other than that there's no problem with letting the neighbour direct things.
In the case of the house, State have taken photographs and documented everything they've done so far. I can't really see any point where EQC would have a problem with it. Cheaper then sending out additional staff to do it, and far better experience for the end customer.
Obviously your insurer was keen to reduce its cost in accomodation payments, if very little needed spent to make the house habitable.
NZI haven't even been interested in looking at our properties despite some being red and yellow stickered.
They WILL be paying us $5000pw or so in rent loss cover, so far they advanced $20,000 in one lump sum but only after a lot of jumping up and down, the broker seems to think he was doing us a favour getting that sorted! We have no confirmation or acknowledgement that regular payments will be made. This was the first non EQC payment we received despite losing rent on some properties since Sept 4!
But back to your case Andrew S, I would be interested to know what type of age and style of dwelling you have and what type repairs they did to make it habitable.
Yup, they are indeed trying to reduce accommodation payments, and said as much upfront. In this case it's in our interests though - major repairs are required to our house, and we won't be able to live there while they're in progress. The allowance is capped at $20k, so we need to make sure there's enough left to cover us while we're moved out.
Ours is a typical late-60s somerhill stone block house, with an extension added in the 80s. Pretty much every wall on the inside has cracking in the gib/plasterboard - so I'm guessing a lot of that will need to be replaced and repainted. Half of the doors don't close, cracks in the ground run under the house and up into the brickwork. The clincher will be whether the foundations have shifted - if so it'll probably be uneconomic to fix the house.
As to whether our insurance company will be helping us through the later stages I can't guess, but up til now we've been glad to have them there. I hope they'll continue to be the front face for it though. They're likely to have to pay regardless, so if they keep up the good customer service they'll at least get some nice PR about it. If they're really lucky, our costs will be low enough that EQC will cover the cost anyway!
After all of this we're really gonna know which insurance companies are good and which ones aren't.
I have to ask which suburb you are in.
I have one property near the Heathcote River, it had minor cracks in the foundation in the line of barely noticeable cracks in the ground after Sept 4. The neighbours had corresponding zig zag cracks into their brickwork. EQC said they were minor and would be epoxyed up they allowed $7,700 to do that and all internal crack repairs, painting and repairing the tile roof.
After Feb 22 the minor cracks turned into fissures in exactly the same spot. The house moved about 50mm off the foundation and there is a slot another 50mm between the ground and the foundation. The whole section is perhaps 75 to 100mm longer (the fences demonstrate the stretching). My concern is that if Feb 22 hadn't happened and with the cracks already there from Sept 4, over time erosion and settlement may have caused the ground to move as it did on Feb 22 slowly tipping backwards (as it did instantaneously last month) and EQC's epoxy repairs would have failed and I wouldn't have been covered for the loss from EQC's bodge job.
So my advice is not to accept EQC's strategy for repairs unless they give you a full geotech report and accept liabilility for any failure of the repairs. If you have a lot of doors and windows jamming badly then you probably have had substantial floor movement particularly if it's a timber floor.
What temporary repairs did they need to do? Did that just involve work to make it safe and watertight?
We're in Burwood. It is indeed a timber floor, on concrete piles. We've got the cracks in the brickwork, some are hairline, while others you can fit your finger in. Around the windows you can see extra wood because the brick facade has moved out of place, and like you we've got the separation between ground and foundation.
The repairs and inspection were definitely only of a temporary/safety nature. They've taken down some brick that was loose near the driveway and stuck plywood there instead; they've gibbed up the fallen ceiling in the dining area; and they shaved or adjusted the most important non-closing doors.
Your warning is relevant - while the insurance does cover earthquake damage, things are a lot more fuzzy with regard to land settling that might occur after, especially if the repairs are inadequate.
At this stage I'm rather hoping they'll decide it's all too much to fix permanently, and so it'll be pulled down and rebuilt. If they do offer to repair it, I'll be getting an independent assessment.
Bernard, I think alot of NZers would really like to help people in Chch get their claims processes via the private insurers more quickly. And perhaps the best thing I could do as an outsider is pledge to change my insurance company based on the feedback regarding performance that we get from the people in Chch on the various insurers.
I'm thinking a simple anonymous points-type rating system which could be input to and displayed on your website.
It might work something like - individuals must lodge their insurer and policy number as a unique reference to input data to the system. Then they rank their insurers performance to date. The system displays for the public the results by insurance provider and the total count of unique policies contributing to the average rating displayed on the website.
Others of us can lodge pledges to switch our insurance company away from all those insurers who are rated as say, 5 or less out of a scale of 10.
Kate, Bernard - I've developed similar to rate suppliers with regard to supply chain performance. It seems hugely subjective, however, it's not. The approach I used was to define key steps in a process, eg. product development, or say remediation in this case. Then characterise and numerically score (1 to 10 say) the behaviourial response regarding each process step. With the subjectivity discretised into objective 'chunks' it then becomes a numbers game and suppliers could be more objectively rated, compared and performance managed accordingly. I don't have time to help you with this, but you may care to ask around others that have used same or similar systems, that might in the end lead to a useful analysis of performance. You'd measure insurers as well as EQC.
Cheers, Les.
FYI to all
This is a fascinating review by an expert panel from 2009 of EQC's ability to respond to a catastrophe. It looks like none of the recommendations for change were implemented before the Christchurch earthquake.
Here's the link.
http://www.eqc.govt.nz/downloads/pdfs/CRP-Review-Report-final-280509.pdf
It found EQC wasn't set up to handle the claims from a major disaster and its links with private insurers was poor.
Here's a taste from the report. It's verbatim. I have bolded the scarily prescient bits from the 2009 report.
The panel observed that:
• there is a misalignment of role expectations between some areas of government and EQC
• there is minimal guidance from government on what constitutes acceptable processing
times for a moderate or large scale event
• there is some duplication of effort in processing and claims approval
• EQC has a small number of staff therefore the loss of one or more could compromise the
activation of the CRP
• provider organisations have limited internal capacity and the loss of one or more of their
staff could compromise activation of the CRP
• CRP documentation is difficult to navigate and the presentation does not take advantage of
current document production techniques
• there is only an informal debrief and reporting process following activation events
• there is minimal collaboration with private sector insurers.
EQC’s relationship to private sector insurers
The quality of the relationship between EQC and private sector insurers is important for the
following reasons.
• EQC depends on private sector insurers to provide it with timely information on the
insurance policies they hold so EQC can validate and process claims against them.
• Home owners with damages over the EQC caps depend on settlements from both EQC and
their private sector insurer to finance replacement or reconstruction.
• Private sector insurers who receive claims for damages over the EQC caps must wait on
EQC to make decisions about settling claims before they can settle.
• In the event of a moderate or major disaster generating tens of thousands of claims,
capacity to process claims will be scarce and EQC will compete against private sector
insurers for it.
A number of issues in the current relationship could cause delays and inefficiencies in settling claims,
both by EQC and private sector insurers, and could delay the release of funds for reconstruction
following a disaster.
These issues include the following.
• EQC does not have direct access to information on the details of the people and residences
it covers. Instead, EQC must iteratively and manually verify with private sector insurers,
claim by claim, that a claimant has a valid insurance policy. This adds cost and time to
EQC’s claims processing. In a large scale event it could cause a bottleneck. Direct access to Page vi Review of EQC’s Catastrophic Response Operational Capability
this information would enable EQC to better target information to uninsured home owners
on the benefits of EQC cover.
• Processing of claims between EQC and other insurers is inefficient in the following ways:
– claimants with large claims are required to deal with two insurers
– there are multiple call centres – for EQC cover and private sector cover
– claimants are required to provide similar information twice
– multiple assessments of damage are carried out by two teams of loss adjusters
– there is potential for dispute over assessments of damage between the insured and
EQC
– there is potential for bottlenecks as private sector insurers await the conclusions of
EQC settlement decisions before undertaking their own assessments
• In a large event inefficiencies in the use of scarce resources would contribute to delays in
settling claims.
Err, thanks Bernard, that's cheered us all up no end, not! Still, better to have the facts than unreality. Cheers, Les.
PS - I think I can now, and will be able to (sadly) vouch for a fair few of those points.
PPS - as you can probably guess, I am none too surprised. The sad thing however, is that institutional incoherrence is evident in more critical departments, ministries, so as I say, no surprise it is in EQC. Problem is however, how will it be recognised and dealt with, and I don't mean just EQC?
Andrew: We live in a free market economy, and so no one can force the insurance industry to work together.
What if interest.co.nz changes the balance of power, and produces a list of companies with the experiences of customers in dealing with them?
Because first of all, are there differences in companies, or in policies, or in individuals?
This process is going to be LLLLooooonnnnggggg and slow. lack of basic logistic processes is the main problem.
Do you honestly think that EQC or the insurance companies have the money to pay everyone out within a year or Two? Answer is NO, these costs will be spread out over (and I know of one insuracne company who have a Earthquake division set up for 8 years) a period of time to reduce the impact on their cashflow.
See this comment from the Hooker article.
"It is not difficult to locate people who have lost their entire business as well as their house and contents. Try telling that person to submit an invoice for accommodation costs when they are living out of the boot of their car having left their house in fear".
Is this a genuine circumstance or just some words for illustration and not necessarily true?
While I wouldn't be surprised if some people had to sleep in a car (or stay with friends) I don't think the insurance companies should just throw money away either until justified.
My policy says it pays the reasonable costs of temporary accomodation and if the insurance company say that "costs" means "costs spent" then I could understand they might want proof of how much we did spend. If it was in a motel there would be an invoice or a credit card entry. If I slept in a car I might not have had any extra costs.
All examples are totally genuine and exist. Obviously I can't identify individuals. But the examples exist, and in some cases are totally genuine. I didn't say the people were living in their car. But everything they have is in their care and they go from house to house sleeping on the floor of friends' homes.
"The Insurance Council and the Earthquake Commission (EQC) disagree over who will cover what insurance costs of the Christchurch earthquake.
EQC chief executive Ian Simpson has said the February 22 quake would be classified as a new event for some but not for others, meaning some homeowners would be covered for $200,000 by EQC and others for only $100,000, The Press reported today.
He said homeowners already paid $100,000 after the September earthquake would qualify for another $100,000 of additional damage, because the February 22 earthquake was being treated as a new earthquake.
Also if insurance cover rolled over between September and February, the EQC cover was reset.
Quake-hit homeowners unlucky enough not to have been assessed by the EQC after September 4 would be covered only once for $100,000, meaning insurers would have to meet more of the bill." herald
Well that seems fair and reasonable...:-(
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