New Zealand’s Earthquake Commission (EQC) has proposed to double its payout amount, scrap contents insurance and process claims through private insurers, in its review of the 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 2010-11 Canterbury quakes, Associate Minister of Finance Steven Joyce and EQC 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.
The government’s proposals include: private insurers authenticating and largely managing claims on the EQC’s behalf with terms to better align with usual insurer practice (at present, EQC and private insurers share claims-handling responsibilities, depending on the type and value of the claim); building cover to also include site work to remove an overlap between land and building cover; doubling the cap on building cover to NZ$200,000 (US$134,000) while land cover would apply only where rebuilding is not possible.
The revamp would also lift the standard building claims excess to NZ$2,000 from NZ$1,000 per claim. EQC will leave contents insurance to private insurers. EQC premiums will reflect the costs of running the scheme.
Public feedback on the review’s recommendations will close on 11 September. The government hopes to introduce legislation to Parliament in early 2016.
The changes proposed are broadly supported by the Insurance Council of New Zealand (ICNZ), said Mr Time Grafton, the CEO of the general insurers’ trade body.
He added that the level of the EQC cap and several technical issues need to be looked at in detail, and said the ICNZ has established an expert working group to study the proposed changes.
The EQC, which is a government agency, offers natural disaster insurance to residential property owners, and currently provides cover for damage of up to NZ$100,000 on a replacement value basis, if the property owner has a private insurance policy for the home that includes fire insurance. It covers up to NZ$20,000 for home contents. Disasters include quakes, natural landslips, volcanic eruptions, hydrothermal activity, tsunami and natural disaster fires.
According to the EQC’s website, it has settled NZ$8.56 billion claims of its expected NZ$12 billion liability related to the Canterbury quakes.