Bumpy ride for insurance

JOHN MCCRONE

Last updated 11:05 04/04/2011

 

Insurance has suddenly become one of the most-used words in Christchurch homes. JOHN McCRONE takes a look at the state of the besieged industry.

On the one hand, Christchurch is supposed to be insured to the gills when it comes to the earthquakes. The cash should actually be there to rebuild.

But on the other, insurance is also an issue of huge uncertainty for many at the moment. Will the insurers pay out? Will they even survive such a costly event? Maybe the financial pressures mean they will be looking for every excuse not to pay, or at least drag payments out for as long as possible.

Doubts about whether the system is going to deliver as promised have been fuelled by a stream of complaints.

Central city firms like Canary Furniture have found their business interruption payments docked because of strange clauses like "depopulation" - a neat little catch-22 where because there is no foot traffic due to the quakes, the insurance company's reasoning is there is proportionately less in the way of business profits to be compensated.

The tales keep coming, large and small. A Burnside resident claimed his insurance firm inspected his home and told him it wanted to knock him back from a full replacement policy to a lesser indemnity one because the "poor condition" of his house warranted depreciation for wear and tear.

Waimakariri MP Clayton Cosgrove, Labour's earthquake spokesman, says he is hearing so many unfair stories. An Ohoka woman who wants to move house but can't complete the purchase because insurers are refusing to take on new business in the region. An elderly couple whose home is "puckerooed", unliveable and awaiting demolition. But they have to keep the insurance premiums going - and the firm has just hiked them by a third.

Another elderly couple who had a total replacement house policy, rather optimistically turned up at their insurers with the original architect's plans in hand, expecting a straightforward rebuild. "But the insurer's gone no, no, no," says Cosgrove. "Suddenly they're being wrapped up in red tape and shortcuts, being told that's too expensive, so we're not doing this."

Cosgrove says insurance is key to almost every aspect of getting back to normal life. But for a lot of people, it does not appear to be working out either quickly or smoothly. "The worry is that many of the insurers may be engaging in cash flow management. They're dragging the chain as long as they possibly can before they write out a cheque," says Cosgrove.

Others have been hearing the same stories too. Auckland insurance lawyer Andrew Hooker - who has set up a "how to claim" website, claimsinformation specialists.co.nz, especially for the Canterbury earthquakes - says initially, from a distance, he believed the region was going to be well served.

"I was sitting listening to the EQC talking about how many houses they'd assessed and how they were on target, and I thought this is all right.

"But then when you get down there and lean on a bar, start talking to a few people, you realise that's not what's happening."

The earthquakes should have proved the insurance industry's finest hour, says Hooker, however no-one is saying it looks that way at the moment.

Then there is the other view. Mistakes have been made. Hardly surprising given a sequence of disasters so overwhelming in scale. People have complaints. But just sometimes they are problems of their own making, or a reflection of stress and impatience.

Yet generally the insurers have honest intentions and are simply struggling like everyone else with the effort of putting a city, a province, back together again.

The insurance issue breaks into three blocks. In the immediate frontline there is the EQC which covers the first $100,000 of house damage and $20,000 of contents. There are then the private insurers who are liable for losses over these amounts. Private insurers of course also cover all commercial losses as the EQC scheme only extends to residential property. And then third, there is the Government which has been forced to step in and underwrite the repair of the land. Working with engineers Tonkin and Taylor, the Government has to decide who can stay, who will have to move, and this obviously has an enormous knock-on impact on anything the EQC or private insurers can do.

Earthquake recovery headquarters is a block of offices on the leafy fringe of South Hagley Park. Shared by the EQC, Fletcher's earthquake recovery (EQR) operation, Tonkin and Taylor and others, the buildings are still undergoing their own quake patch-up after February 22. The sheet glass windows that fell out from the top floor have been replaced, but there is work unfinished inside where ceiling fittings came down. EQC senior claims co-ordinator Reid Stiven starts with a simple demonstration of the scale of the task before the insurers - a walk around the repository, a warren of shelves on which every file represents a claim.

After many twists and turns, we reach number 167,122 and arrive at the back wall. But with 187,000 claims from the first quake, and at least another 90,000 from the second, the whole repository operation is about to be out- sourced. The files will need their own warehouse, says Stiven.

It is the same for the army of assessors. In the first months, the teams and their gear were all based here. But numbers have long swelled to the point where there are six offices spread about, including one in Timaru.

The EQC now employs some 255 insurance loss adjusters partnered with another 255 expert builders, all on rolling three-week contracts.

Stiven says the numbers have probably reached their maximum. It is a judgment call, but he believes throwing more bodies at the work would be to risk the level of competency and consistency that has been achieved.

Stiven says there are many misconceptions about the EQC. In fact as often as he hears the complaint that assessors are too tough, there is the comment the EQC seems a bit of a soft touch.

Some home-owners have been surprised they will be covered even for minor interior damage. Whole rooms are being ticked off for re-painting for the sake of a few hair-line Gib board cracks.

Yet that is how it is meant to work, says Stiven. "We have a philosophy of maximum entitlement, and that's reinforced to our people all the time. If there is a reasonable benefit of doubt, that should be extended to our claimant."

- The Press