Canterbury Earthquake Insurance Settlements Top $12B

Insurance payouts for Canterbury earthquake claims has topped $12 billion, according to the Insurance Council of New Zealand.

In line with insurer projections, 2014 looks set to be a watershed year for the Canterbury earthquake insurance claims as 80 percent of commercial claims and 66 percent of all residential claims (over cap and out of scope) have now been fully settled.

At the end of June 2014, private insurers had paid out $7.7 billion in commercial claims and $4.4 billion in settling residential claims, totaling $12.1 billion.

Last quarter saw a major ramp up in progress with 1,517 over cap claims settled, double the previous quarter. That’s 17 claims settled daily and insurers handing over 43 repaired or newly built homes weekly to their customers.

“The settlement of Canterbury earthquake residential insurance claims has definitely reached a turning point with 50 percent of all over cap claims now fully settled and 72 percent of the out of scope claims completed,”said Insurance Council Chief Executive Tim Grafton.

At the end of the June quarter, insurers had 22,739 dwelling claims over the $100,000 plus GST EQC cap, according to the Canterbury Earthquake Recovery Authority (CERA) survey, 284 more than the March quarter.

“Private insurers have reached the halfway mark by fully settling 11,392 over cap dwelling claims, including the completion of 2,203 rebuilds and major repairs,” Grafton said.

Of the 11,347 over cap claims remaining, 8,110 insurer-managed rebuilds and repairs are in progress: 1,611 (20 percent of 8,110) are currently under construction; 442 (5 percent) in consenting with a local authority or government agency; 1,089 (13 percent) under contract (when a building contract has been signed by the customer but work on site has not yet started).

The balance of insurer-managed major repairs and rebuilds are in pre design (scoping or collection of technical data), detailed design (with a designer/architect) or pricing (tender or pricing for construction).

Of the 11,347 over cap claims still to be fully settled, 1,218 are customers still undecided about their settlement offer and 1,169 have yet to be given a settlement option. In the previous quarter there were 2,876 in these categories

“The 20 percent drop in the number of customers undecided or with no offers, represents the substantial effort by insurers to progress claims that may have previously been stuck,” says Grafton.

“The success of the Residential Advisory Service in providing independent advice and the role community groups play in supporting residents, particularly those in vulnerable circumstances, has undoubtedly contributed to moving these claims forward,” said Grafton.

The CERA survey also confirms that 9,189 claims were cash settled with a further 850 awaiting their agreed cash settlement to be finalised. It’s important to note that cash settlement can include houses that have been built or are under construction outside of the insurers’ project management offices.

“In spite of insurers receiving over 700 newly over cap dwelling claims from EQC this year, they’re still confident almost all major repairs and rebuilds will be completed by the end of 2016,” he said.

There were 64,320 out of EQC scope claims (e.g. pathways, driveways etc.) with 46,317 (72 percent) now fully settled. A further 9,112 (14.2 percent) are with PMOs for completion and 8,739 (13.6 percent) have agreed external resolution but not yet finalized.

However, Grafton cautions that while insurers have their eyes firmly fixed on the end game, it’s important stakeholders and key partners don’t go into a second half lull.

“Some headway has been made with complex multi-units where insurers and other parties are finding pragmatic solutions but there are still many complicating factors outside the control of insurers that could hinder the pace of progress,” he said.

Land repair, retaining walls, Port Hills mass movement areas, customers delaying decisions, the judicial case on EQC compensation models for land with increased vulnerability to flooding (IVF) and liquefaction (IVL), contaminated land and flood zones are just some of the issues still to be fully addressed.

“We’re also still concerned about irresponsible advocates hyping up customer expectations, encouraging them to prolong their settlement by taking court action when there are free services and processes available to provide advice and facilitate dispute resolution,” said Grafton.

Source: insurance Council of New Zealand