I came across the latest ‘media release’ from the Insurance Council of New Zealand at the end of last week which had been published in the Dominion Post on 12/12/ 2012. I have not seen it published in Christchurch – did you? No doubt many Cantabrians would have had the similar gut response which I had upon reading. Does the Insurance Council really think Cantabrians are likely to believe this latest spin.
So I will take the opportunity here to add to the list of ‘urban myths’ as the Insurance Council calls them. The article was entitled “Insurers Not Delaying Settlements: Claims that insurers have sought to delay or avoid payments in Christchurch are urban myth” . The article can be accessed at http://www.icnz.org.nz/news/111212.php.
The new chief executive of the Insurance Council, Tim Grafton, makes a series of points which I want to address individually. The first of these is the ‘urban myth’ that there is ‘no commercial reason for insurers to delay claims’. It is a well know global fact that the insurance industry uses the delayed settlement of insurance claims as one of its strategies for cost saving. The motivation for delay is profit. Yes, delays do mean ‘inflation and raised building costs’ but these sums of money are off-set against the margins they make and amount to less than the advantage of keeping a large pooled ‘float’ sitting in term investment funds making interest. Why the insurance industry keeps denying this fact is beyond me. State Insurance for instance, my insurer, has spent the last two years sending round all manner of people to our property- in fact 20 visits to be precise, over 36 people involved and tens of hours worth of discussion and reporting. This will have cost them literally tens of thousands of dollars. Yet it is still a much cheaper solution than simply paying our claim and consequently we’re still waiting for settlement. In addition insurers are slashing payouts to worn-out property owners who have given up the wait and the fight and which is saving the insurance industry millions if not billions of dollars. (See http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/8091609/Slashed-insurance-payouts-costing-city-millions).
As you look around the city it is clear that there have been very few ‘high cost’ rebuilds commenced i.e. over the $100,000 cap. There are two reasons for this. The first is that completing the ‘small jobs’ inflates the numbers of repairs completed which ‘looks good’. Leaving the large jobs till later means that the insurers retain their capital- so much for triage of the vulnerable.
I am not sure why the Insurance Council suggests said that it is ‘superficially persuasive’ to suggest that all claims should be settled within two years – I’ve certainly not heard that said. It is clear however, that there are many people whose claims could have been settled as a consequence of uninhabitable or unrepairable homes yet the insurance industry is intentionally failing to expedite these claims.
The uses of the argument the ‘Continuous land shaking has slowed down claim settlement’ – this argument no longer holds any weight. The last major shake we had was last year. We have not had a quake above a five on the Richter Scale in 2012. We are now nearing the end of 2012- that’s almost one year ago. And besides earthquakes do not impede cash settlements. The major insurers have been saying for some time now “Our position is that seismic risk is not preventing us carrying out any of the rebuild activities because we have to weigh that up with getting people’s lives back in order,” IAG’s Mr. MacGregor said (See http://www.stuff.co.nz/the-press/news/7592214/Complex-issues-slowing-payouts) and Vero chief executive Gary Dransfield said: “We are not letting the risk that there will be another above-6.0 event in the next year stop us from getting on with reinstatement [repair and rebuild].” So stop using this lame argument as the reasoning for non performance. I don’t think there are any Cantabrians persuaded by that argument any longer. It has simply become a convenient excuse to field to the rest of the country.
The Insurance Council states that the ‘Co-insurance model [is] not designed to meet multiple events’ – so this is the ‘pass the buck’ argument. Yes the co-insurance model clearly does not work and a single public model is a preferable one. Demonstrably the private model does not work. A model which has the interests of the policyholders at heart, not the private insurer shareholders. The private insurers are once again using EQCs input as an excuse to delay claims further.
The Insurance Council asserts that delays have been due in part to the ‘need for detailed land damage and geo-tech assessments’ and the ‘need for flood data’- granted this information is required in some areas. However Gerry Brownlee asserted back in July that “As of today that information is all there in front of them,” he said. “But I think it would be wrong to say they haven’t had a big lot of the information on the way through”. (See http://tvnz.co.nz/national-news/stop-excuses-brownlee-tells-chch-insurers-4989060- ).
As for the statement about insurers prioritizing the most vulnerable- there are many who would argue that this is simply not happening. I have spoken with several in their eighties who have been told it’ll be 2015, 2016 or 2017 before they’ll see any repairs, if they don’t die first.
The business insurance success story- to date 50% of these claims are said to have been settled with only 21% residential claims settled. A new survey by InsuranceWatch shows thatinsurers are completing significantly fewer residential rebuilds than they had promised. In May 2012, IAG stated it would be completing 85 rebuilds per month. In November it completed FOUR rebuilds. IAG claimed that since the release of that information, the overall number of rebuilds completed this year rose from 49 to 102. (See http://www.radionz.co.nz/news/canterbury-earthquake/123506/cr-says-insurance-battle-is-ongoing). InsuranceWatch estimates that fewer than 300 houses have been replaced in 2012 and of these most have been new houses on new sections. There is a major disconnect between the ‘spin’ reported by the insurance industry and the reality for insurance policyholders on the ground. Some 80% of InsuranceWatch’s latest respondents have experienced delays of some kind. (See http://insurancewatch.org.nz/docs/Press%20release%20-%20December%2013%20-%20Rebuild%20Yeah%20Right.pdf).
IAG head of earthquake recovery Dean MacGregor said the slower residential settlement was because residential claims were more complex. He cited land zoning, the wait for foundation repair guidelines from the Department of Building and Housing, apportionment issues between the Earthquake Commission (EQC) and insurers, and the drilling on properties in the green-blue technical category 3 area as the reason for complexities. (See http://www.stuff.co.nz/the-press/news/7592214/Complex-issues-slowing-payouts). And yet here I am, a green zoner, surrounded by a group of other green zoners- all in the same situation, in an area of town now considered ‘extremely desirable’, in the West of the city, with no land issues, no new foundation requirements still waiting to settle some 2 years and three months after the event. The list of given excuses fails to hold much water.
Over and above this I heard Gerry Brownlee saying on National Radio last week that the pace of claim settlements is increasing and a ‘grand scale’ advocacy service is no longer necessary. This despite the fact that 80 per cent of residential claims have not been settled. The initial proposal has now been ‘delayed and scaled back’. This despite that fact that he said ‘there is no denying there are still significant insurance problems in the city’. His ‘leave it to the market’ attitude is simply not good enough. (See http://www.radionz.co.nz/news/canterbury-earthquake/123506/cr-says-insurance-battle-is-ongoing). Where are Mr. Brownlee’s figures?? InsuranceWatch’s figures suggests this is far from the truth.
Recent major global catastrophes have had little or no effect on insurer profits, this despite the claimed ‘poor returns on long-term investments’. All those insurers who were adequately capitalized have made good returns these past years, here are some figures. (See http://www.sharechat.co.nz/article/911760d2/insurance-australia-group-reports-jump-in-nz-profit.html; http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10808393; http://www.insurancenews.com.au/analysis/gi-insurers-in-good-shape-after-disasters; http://www.fmg.co.nz/news-stories/fmg-profit-announcement).
The Insurance Council states that policies will move from ‘Open ended replacement policies to fixed sum insurance’- why? This will see increases in premiums and liabilities more definable- so in the event of a major event the insurer would know the worst case scenario cost of its liability – making it easier to secure reinsurance because the loss can then be clearly defined- whether it not it represents good value for client’s remains to be seen. The reasoning behind this no doubt will be retention of reinsurance support.
The Insurance Council states that ‘Insurers can be proud of their contribution to the rebuild of Christchurch’- I think it’s for the people to decide whether or not the Insurers can be proud of their performance and from where I sit I cannot see much to be proud of – plenty of examples of bad faith abound. Most of the industry should be ashamed of their performance to date. The only issue on which they can be proud is the preservation of their bottom lines at the expense of the Christchurch population.
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