This week we are celebrating MAD! Great things have come to pass.
We have had a pretty big impact on the ICNZ Fair Insurance Code so it is great to see that the learnings we have taken from you, the affected insurance customer, have created some positive changes for the future. You can read more about that in the newsletter.
The development of the In the Know Hub has also been exciting in the office. We can’t say too much yet but what we can say is that:
- We have a venue and it is …fabulous
- We have an opening date and it is …soon
- We have community hosts in our sights and they are ….amazing
Now we just need all the stars to align nicely, so come opening day, the Hub is ready to help you as you work towards repairing or rebuilding your home and life.
It’s always worth celebrating a long weekend too so we hope you get to spend your Waitangi weekend exactly as you wish to.
Did you hear? EQC model is sound.
- A snippet from the news article which can be found here.
Minister Gerry Brownlee has this week announced that only minimal changes will be made to EQC, saying the Treasury-led review has found its model “reasonably sound.” On hearing that, like many people all over Canterbury, we had a wee conniption.
24 hours, a little more information and a new phrase later, we can possibly approach the announcement with a little more levelheadedness. We are now at least prepared to read the review when it is released in a few months.
As a starting point for calm analysis of the Minister’s comments, it is worth remembering that the review only looked at certain aspects of EQC, including what it should offer insurance cover for, the role of EQC, and the financial management of the risk exposure to the Crown. Nothing in there about customer service – what a relief! (You can read the terms of reference here.)
During a panel discussion about a reinsurance matter yesterday one of the reinsurers used the phrase ‘mechanical effectiveness’. Applying this term to the EQC review, it can be said that EQC was mechanically effective. The Crown collected premiums from insured homeowners, built up a fund, and added more to the potential pot by buying reinsurance. Then a big event happened and all the Crown money was used and the shortfall was paid out by reinsurers, ultimately meaning there has been money available to fix insured homes. We will give the Minister the benefit of the doubt and assume that his comment about the EQC model being reasonably sound was based on very high level thinking – collect money, insure money, pay out money. That’s mechanically effective.
The problem with saying that only ‘minimal changes’ will be made is that most Cantabrians need to hear the Minister admit the broader reality of the situation – that almost every EQC process other than the ‘mechanically effective’ reinsurance model needs major change. Operationally, EQC’s most pressing issues are around how it relates to its customers, the interface issues between EQC and the private insurance market, and the clarity (or lack thereof) of certain terms within the EQC Act.
Perhaps the Minister might like to add some context to his statement (to protect us all from further conniptions), and while he is at it, announce an operational review of the EQC model. That would say, “Canterbury, I heard you.”
You can read the Minister’s comments about the review of EQC here./************ get tags and categories ****************/ ?>
Revised Fair Insurance Code – how we made a difference
We have not had time to study either document in depth but can give you our first impressions. A more detailed report will be in the next newsletter.
Part 1 – Report to Submitters
This is a 36 page document which discusses the Code in terms of the issues raised by submitters and how the Review dealt with those issues. It is interesting to see how the Review team went about their work and they do seem to have been diligent in trying to bring together the different perspectives with those of the insurance industry.
The CanCERN submission was quite extensive and we tried to cover as many bases as we could. We were also one of two submitters to meet with ICNZ to speak to our submission. It is gratifying to see that the issues we raised were considered and at times incorporated into the thinking behind the Revised Code.
Despite the amount of noise made about the performance of insurance companies a surprisingly small number of submissions were made to the Review. They consisted of: Banking Ombudsman, CanCERN, Commerce Commission, Consumer NZ, David Adams, Fairway Resolution Limited, Financial Services Complaints Limited, Human Rights Commission, Insurance and Savings Ombudsman, Jake Preston, Ministry of Business, Innovation and Employment, Topografo.
One wonders why neither the Law Society or one or more law firms couldn’t find the time to make a submission. The absence of a contribution by the Privacy Commissioner is a concern as difficulties in obtaining timely access to information held by insurers were wide spread. Dereliction of duty in these quarters does not inspire confidence.
As the content of this Report is unlikely to be of general interest we will not be commenting on it further. If you are interested in its contents contact us and we will e-mail you a copy.
Part 2 – Revised Fair Insurance Code
This is the intended replacement for the current Code. The contents have yet to be formalised, but once that is done next month, the Revised Code will take effect from January 2016. You can download a copy of the Revised Code from the ICNZ website here: http://www.icnz.org.nz/for-consumers/your-rights/fair-insurance-code/
ICNZ describe the key changes as including:
- Enhanced, effective communication with the insured, particularly concerning up-front disclosure of key information;
- Insurers committing to act reasonably when faced with the non-disclosure of relevant information by the insured;
- Introduction of best-practice timeframes for communicating with the insured at claim time;
- Insurers will train their staff and agents about the Code so they can fulfil their responsibilities as well.
One of the changes we are most pleased to see is recognition of the fact that catastrophes challenge the Code significantly. The Revised Code now says:
- When a catastrophe or disaster strikes we may receive a large number of claims, and we may be especially reliant on third parties. This means we may not be able to meet the timeframes set by this Code.
- However, when a catastrophe or disaster strikes, we will:
- use our best efforts to meet all of our commitments in this Code
- respond as quickly as possible and in a professional, practical and compassionate manner
- update you at least once every 20 business days until your claim is resolved, and
- prioritise our service for our most vulnerable customers.Our initial view is that the Revised Code is a significant improvement of the current Code. However some issues do not appear to have been addressed as clearly as we feel is warranted. We will spend some time going through both the Revised Code and Report to Submitters line by line and report back to you how well we think the imbalance between insurers and customers has been addressed and what additional work needs to be done.
EQC land claims – resident questions answered
Last week, we posted an article by Lane Neave Lawyers about Increased Flooding Vulnerability (see it here). That article was also posted on one of the earthquake-related Facebook groups, and a helpful Q&A soon followed in the comments section between residents and lawyer Duncan Webb. We’ve been given permission to post an abridged version and have removed names for privacy reasons. It’s quite a bit of info to get through, so you may like to skim through the questions in bold and see if there’s anything that piques your interest. Cheers to the residents who asked questions and Duncan Webb for letting us publish this!
What you are advising people to do when Insurers are insisting on assignment of full land claim for damage (without IFV) in order to settle (cash settlement)?
That can be a tricky question. Insurers often claim that they are entitled to this because the repair / rebuild requires land remediation. The right thing to ask the insurer is what land damage (ie actual damage, not pre existing condition) is being remedied by the insurer that triggers a right to any EQC land funds. They will often respond by saying that they are improving ground conditions (particularly if filling for a rib raft foundation) or are raising the level of the house. In response you might note that this is as a result of local body and Building Act regulatory requirements and they are captured by the Policy. Ultimately it is a question for you – some people will accept the insurer position on the basis that the money may never arrive or may be small and they want to get on with their lives. However others have successfully argued against the insurer getting this assignment. It does depend on the facts of the case. If you are going to enter into the assignment I would advise capping the amount to cover only the identified “land remediation” that the insurer says that it is going to have to do for the reinstatement.
We signed a DOA (deed of assignment) as we were a major repair on a TC3 section in the flood zone. We’ve now gone to a rebuild. The major repair was not foundation replacement therefore not triggering land money being paid over. Now that we need (TBC though) 1.2m foundations, if land remediation is required is our insurer entitled to it given that they’ve changed the goal posts and it was not an issue before?
That is exactly the right question – but the answer is sadly not clear. Insurers would be obliged to build the house on the land as part of the “regulatory upgrade” clause in the insurance policy. Insurers argue that you must provide good ground (or at least as good as it was pre earthquake) as they do not insure land. There is something in this argument – but they need to show – 1. that the land is changed and now more difficult to build on and 2. what the costs of that are.
If you sign a DOA for the land claim, is the IC then responsible for paying the EQC excess amount?
Sadly I think probably not. The excess is that part of the claim that you must pay. The Insurer will say that you must pay over the value of the damage to the land – which is the amount EQC pays plus the excess. The better argument to have is that they are not entitled to the assignment unless and until they can show that 1. they are remediating actual land damage, and 2. they can establish the cost of that remediation.
If a DOA has been signed with the IC but the property may only have a repair to the foundation not requiring land remediation, how do we stand legally regarding any land claim payment?
If there is no land remediation then there should be no assignment of the land payment / claim. However insurers often consider things as land remediation which I think are just building costs such as deeper piles, or compacting engineered fill underneath a rib raft./************ get tags and categories ****************/ ?>
‘Betterment’ – when you shouldn’t pay
We’ve heard a few examples lately of residents whose insurer or builder has tried to recoup costs from them, claiming some of the repair work being done is ‘betterment’. In each instance, that ‘betterment’ involved materials that, although improving on what was there pre-quake, had to be used to meet the building code.
Here’s a helpful piece of writing from Duncan Webb at Lane Neave Lawyers expanding on what you should and shouldn’t have to pay for:
Under most insurance policies for homes there are two kinds of betterment that the home owner is entitled to. One is the “as new” or “as when new” repair which means if an element is damaged the home owner is entitled to its replacement with a new item, or that it is repaired to a new standard (strong, durable, functional, visual attributes as new).
The second is modern building standards.
Also relevant is the use of modern building materials and methods although that generally goes without saying (and also means that some things are not replaced like stained glass windows and leadlights). The insurer cannot insist that the home owner contribute to the cost of this betterment – even if it is a bit of a windfall – that is just the policy terms.
However there is no obligation on an insurer to improve your home when repairing or rebuilding. While good faith would suggest some reasonable accommodation should be made as long as it does not cost the insurer in time, money or trouble significantly.
So the insurer does not have to agree to a repair that is larger or different to actual reinstatement using modern methods and materials.
More difficult is cost savings and whether they should be set off any betterment claim (this is like SR’s build to budget). If a house is a rebuild but the home owner chooses not to reinstate some costly elements (which might be no longer chosen by most but still available) like wooden window frames) insurers will not generally credit the home owner with that saving against any outside of policy betterment costs. There is a tenable argument that they should.
Gap Filler mix up