Janine Starks looks at some recourse for Canterbury homeowners caught in a debate with their insurer over claim amounts.

By Janine Starks* (email)

You are at your wits end.  Your insurance company won’t pay what you think they should pay and no one will budge.  Lawyer’s fees are expensive, so what do you do?  Don’t give up.  The equivalent of a 111 emergency call in the world of insurance, is 0800 888 202 and you’ll reach the office of Karen Stevens, the Insurance and Savings Ombudsman (or the ISO as it’s known).  You’ll never believe it, but their service is free. 

Before you get too excited and start blocking the phone lines with complaints, it pays to know that the Ombudsman is not an ambulance service which will come to your rescue.  Neither is the Ombudsman a consumer advocate.  The ombudsman simply an impartial referee who will make a ruling on your dispute, without favouring either side.  Your insurer will have to abide by their ruling, so it’s a good way to solve a disagreement.    

 Without wanting to be a complete party pooper, the straight up truth is that 67% of people lose their case when they go to the Ombudsman.  But we may as well take the glass-half-full approach and view it that a third of people prove their insurer is wrong, which is quite good odds.  In actual fact, half of these cases settle with their insurer, without the Ombudsman making a ruling.   The other half either win out-right or partially win. 

Truth be known, insurers don’t like going to the Ombudsman, so you’ll find they’ll try pretty hard to settle a dispute with you before it gets that far. 

$200,000 claim limit – is it enough?

At first glance, the limit of NZ$200,000 seems a bit hopeless for the likes of Christchurch earthquake victims.  One of the most common disputes is going to be whether a house needs to be demolished or repaired, with both sides probably producing evidence.  With the average home costing in the range of $300,000 to $500,000 to replace, homeowners will be worried about their options in sorting out a dispute, without a trip to the court rooms. 

All is not lost though, because when you read the fine print, it’s not always the full value of the dispute which counts.  It’s only the portion which you can’t agree on.

For example; your insurer says that the value of your claim should be $300,000, but you have expert opinion to the contrary, saying it should be $500,000.  You are arguing over $200,000, which means you are within the limit set by the Ombudsman.  Also, if your insurer agrees to let the Ombudsman hear a claim for more than $200,000, their service can be used.  Just for completeness, the limit is actually $200,000 + GST (GST does apply to the rebuilding and repair of homes), so the limit is $230,000.

To be honest, it would be enormously helpful if the $200,000 limit could be extended for Christchurch earthquake victims.  There are going to be so many issues over the ‘repair’ or ‘replace’ debate and the values are worlds apart in dollar terms. 

Before you even approach the Ombudsman’s office there are three things you need to do (if you don’t do them, they’ll just send you scuttling):

• Step one: Check your insurer is part of the ISO scheme (most are).  Visit the website and go to the section called ‘Participants’ – type in their name in the search facility.
• Step two: Put your complaint through the insurers official internal complaints system.
• Step three: Ask your insurer for a ‘letter of deadlock’ (at this point they’ll know you are very serious).  This letter lays out why the insurer disagrees with your claim.  Once you have the letter, you can approach the Ombudsman.

As a final tip – collect your evidence.  The Ombudsman does not operate on a ‘he-said-she-said’ basis.  Get all your expert opinion in writing, on letterhead.  Every point you make, needs to be backed up by someone independent and qualified to make an assessment. 

EQC and the Ombudsman

The Insurance and Savings Ombudsman does not deal with disputes with EQC.  A different service known as the ‘Office of the Ombudsmen’ looks after government departments. 

There are currently two Ombuds-people, Beverley Wakem and David McGee, who can be contacted on Christchurch 03 357 4555, Wellington 04 473 9533 and Auckland 09 379 6102 or complaint@ombudsmen.parliament.nz.  Again, you must have proceeded through EQC’s internal complaints system, before contacting them. 

Do you have a question for Janine? Email her directly at starkadvice@gmail.com, subject line: Financial Agony Aunt.  Anonymity is guaranteed.   

*Janine Starks is Co-Managing Director of Liontamer Investments. Opinions in this column represent her personal views and are not made on behalf of Liontamer.  These opinions are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product.  Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.