Finally after more than five years of messing around with the lives of thousands of Cantabrians the Insurance Council has introduced a new code of conduct for its members. Insurers face a potential fine of up to $100,000 (yes that’s all) for breaching new industry standards including time frames for responding to claims.
Unlike our Australian counterparts there has been no maximum time frame in New Zealand by which an insurer must have settled a claim. Despite the new measures, insurers are still only required to meet minimum time frames for responding to the public when claims are made and keep them informed about the progress of their claim.
New Zealand insurers have performed appallingly. It is reported that insurance companies in the Christchurch market have been rated the world’s slowest to respond to a major disaster. The insurance broker Marsh released a report showing how the performance of Christchurch insurers compared with that of their counterparts in Japan and Chile after recent major disasters in those countries. Throughout the last five years we have heard the much repeated cry about the Christchurch earthquakes having been an unprecedented event. Yet in the Marsh Risk Management Research Report a comparison is made of the following earthquakes: Chile, February 27, 2010; New Zealand, February 22, 2011 and Japan, March 11, 2011 comparing, coverage elements, policy features, and practical considerations in relation to each event. David Pigot, Chairman of Global Claims Practice (Marsh) states that “New Zealand was the least prepared of all from an insurance perspective. Although the country was conscious of earthquake risk and had a long-standing insurance scheme run by the Earthquake Commission (EQC)…”
Insurers in New Zealand are right to be concerned about their reputations as a result of their handling of the Canterbury earthquakes…and still there are thousands of claims to be settled. In addition, the courts are backed up with cases waiting to be heard and group actions are also in progress. And there will be more.
I find it extraordinary that in a country known throughout the world as ‘the shaky isles’ that the insurance ‘code’ did not take catastrophe situations into account. The revised Code, which came into effect on 1 January 2016 is said to commit ICNZ members to ‘higher standards of service’ in all their dealings, not just with respect to claims. But let’s face it, as usual the document and its content are like a slippery fish.
Key changes to the new Code include:
- “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 time frames for communicating with the insured at claim time;
- Insurers will train their staff and agents about the Code so they can fulfill their responsibilities as well.”
Isn’t it time that we were having a very careful look at:
- the timeliness of insurers’ decision-making;
- the adequacy of communication with policyholders;
- the adequacy of the assessment process
- the adequacy of information given to policyholders whose claims were denied;
- the process and timeliness of internal dispute resolution
You may remember that insurers in Canterbury established a vulnerability index to prioritize the most vulnerable in the recovery process. A requirement to prioritize the vulnerable has also been included as a mandatory requirement for insurers – presumably this is to avoid situations like that of Mrs Dot Boyd who at 85 years of age was living out of boxes while still waiting for repairs to her home three years after the event, despite her plight having been brought to the attention of authorities eight months earlier.[i] And then there was Alf Johnson, a 92 year old from St Martins asks “why am I still waiting for a new house?”[ii] His insurer, State Insurance, says the company was aware of Alfred’s situation and had prioritized him based on his age and the condition of his home.
‘Serious breaches’ of the new code, which came into effect on Friday, could be punishable by fines of up to $100,000. Claim resolution that takes five years is in my book a very serious breach….. Don’t hold your breath – the corporate leopard rarely changes his spots.
And what about EQC – probably the deliberately worst performer of them all – where is its ‘Code of Practice’?
[i] EQC bosses meet Brownlee over plight of elderly victims, Fairfax NZ, Christchurch Press, March 08, 2014.
[ii] Alf, 92, waiting on tardy insurer, Ashleigh Stewart, Christchurch Press, March 25, 2014.