News Non-Life21 Mar 2018

New Zealand:Govt agency to raise quake cover by 50%

21 Mar 2018

A proposed revision to the Earthquake Commission (EQC) Act will see the liability cap for residential buildings increase from NZ$100,000 (US$72,000) to NZ$150,000, plus GST, said the Minister Responsible for EQC, Megan Woods, yesterday.

The changes will also remove EQC cover for home contents that currently is up to NZ$20,000 plus GST.

The government is speeding up the review of the Act, started in September 2012. It expects legislation to be passed by the end of the year, so that changes to the state insurer for natural disasters can be implemented by 1 July 2019.

Ms Woods said: “Removing cover for contents will increase EQC’s ability to allocate more resources when responding to a natural disaster and help reduce any delays in resolving residential building and land damage claims.

“Government has talked to the insurers and the indication is that private insurance cover for contents will continue to be available at a reasonable cost.”

She said that the changes will also enable EQC to accept claim notifications within two years of a natural disaster, rather than within the current three-month limit.

Furthermore, they will clarify “EQC’s authority to share information to support the implementation of the EQC Act and settlement of insurance claims, and where this is in the public interest and safety”.

EQC provides limited insurance cover for those affected by natural disasters, including earthquakes, landslides and tsunamis, as long as they have private home insurance policy that includes fire cover. If the damage is worth more than EQC's cap, the agency pays to its limit and the claim is passed to private insurers.

To fund EQC insurance, those with private insurance currently pay 20 NZ cents plus GST for every NZ$100 of home insurance cover they have, which is passed on from their insurance company, which is capped at NZ$276 a year.

Separately, a review will be carried out of the EQC including issues around land and claims handling. The review will also cover EQC’s operational, resourcing, policy and legislative constraints and any constraints caused by processes with private insurers.


In a response to yesterday's announcement, the Insurance Council of New Zealand says that it welcomes the changes to the EQC Act.

“This morning’s announcement is the first step in improving the Earthquake Commission and its responsiveness to major disasters. We support the changes announced by the Minister and are hopeful that lessons learned from the upcoming inquiry into EQC will lead to further change,” said Insurance Council Chief Executive, Tim Grafton.

“The lifting of EQC cover to $150,000 plus GST acknowledges the fact there has been no change in the level of cover provided in the Act since 1993. The transfer of contents insurance from EQC to private insurers logically reflects the need to focus EQC cover on what is most needed after a disaster: rehousing people.”

“There is also an important provision to clarify that EQC can share information with insurers to assist in the settlement of insurance claims,” said Mr Grafton. “The last thing that’s needed when you are trying to settle claims after a catastrophe is bureaucratic hurdles creating delays when information sharing is essential to speed recovery and safeguard people.”

“There is still further work required around the management of claims, however. We believe insurers should manage and settle all claims, including those under cap, as agents for EQC. It’s insurers who have the relationships with customers and the bulk of resources, and will already be involved in settling contents claims in any event. This arrangement has been tested and proven by the response to the (2016) Kaikoura earthquake.”

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