Monday 6th July 2015 |
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New Zealand's Earthquake Commission may double its payout amount, scrap contents insurance and process claims through private insurers under the government's long running review of funding and management of the state-run earthquake insurer.
The government has released nine proposals for public discussion as part of the review, in a bid to simplify future claims and resolve difficulties between land and building cover highlighted by the Canterbury quakes, associate minister of finance Steven Joyce and earthquake commission minister Gerry Brownlee said in a joint statement. The review, led by the Treasury, was launched in September 2012 to consider the government's disaster contingency fund's future after its resources were exhausted by the Canterbury quakes that caused billions of dollars of damage and killed 185 people.
Under the government's "preferred reform package", proposals include: private insurers authenticating and largely managing claims on the EQC's behalf with terms to better align with usual insurer practice; building cover to also include site work to remove an overlap between land and building cover; doubling the cap on building cover to $200,000 while land cover would apply only where rebuilding is not possible. It would also lift the standard building claims excess to $2,000 from $1,000 per claim. EQC will scrap contents insurance and premiums will reflect the costs of running the scheme.
The government will retain the Natural Disaster Fund and Crown guarantee and will make clearer in legislation what the EQC scheme covers.
New Zealand's level of insurance penetration is about 80 percent, with the EQC providing cover for the first $100,000, although under the proposals this would double on disasters including quakes, natural landslips, volcanic eruptions, hydrothermal activity, tsunami and natural disaster fires. Global reinsurers underestimated the cost of the Canterbury earthquakes by about 50 percent after they were surprised by the impact of the liquefaction around Christchurch, while local insurance policies provided full replacement value cover rather than the international norm of sum insured.
The review's terms of reference covered what the EQC insures, including the layer of loss covered, which natural disasters are covered, how multiple events should be treated, which types of property should be covered, the coverage of land, building and contents, what caps should be on the scheme, and whether it should be voluntary or mandatory.
According to the EQC’s website, it has settled $8.56 billion claims of its expected $12 billion liability related to the Canterbury quakes, with repairs to 97 percent of the 69,258 homes in the rebuild programme completed. Of 167,613 building claims, with the $100,000 cap, 5 percent are yet to be settled, with 41 percent paid out under cap, 39 percent repaired and 15 percent paid out over cap. It has also paid out 99 percent of its 187,003 contents claims and is yet to settle 21 percent of its 149,886 land claims.
BusinessDesk.co.nz
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