More stuff to worry about! Another disaster that hardly gets a mention these days.
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Recovery fatigue – guest blog by Herman Meijburg
I have noticed that those struggling with the aftermath of the Christchurch earthquakes are having an increasingly hard time staying focused on the resolution of their claims. It is not only my personal observation but this is substantiated in recent reports and articles published in the Press and elsewhere. Why are there so many people in Canterbury still not doing well? Has five years been enough for Cantabrians? Are people giving up? Are Cantabrians suffering from recovery fatigue?
One thing is for sure – it has been a long wait getting to the ‘half way point’. It is fair to say that the long wait has for many been just too long. There is nothing more devastating to an individual’s motivation than ‘a wait too long’. Just like a rubber band, the long wait can stretch our resilience to a point where it’s ready to snap.
It is a fact of life that most disasters hit unexpectedly. The same goes for the Christchurch earthquakes; they took most Cantabrians by total surprise. All of a sudden widespread devastation was right in our faces, we saw buildings collapse, we witnessed how the injured and the dead were pulled out from underneath the rubble, services in disarray. Simultaneously the disaster triggered all the good-will people could muster. People stood up for each other, embraced and comforted each other; sat down and cried together. “Be strong” became the slogan in the face of adversity. And people committed to the notion of “to sticking it out” together, whatever that meant. Nationally and abroad Cantabrians were praised for their resilience (a word since often heard). And there was a firm belief amongst Cantabrians that, in the end, “everything would be alright”.
Now, after more than five years, one might ask “Where has all that resilience gone?” What is left of this initial drive and enthusiasm? Was it post-disaster euphoria? What has happened to all our innovative ideas shared together at the beginning? Most of those ideas have not come to fruition, or have been ignored or have simply dissolved in the ether. The initial protests have also died down. The numbers of concerned citizens seems to have dwindled. Where have all the people gone? How many have simply pulled out or given up hope? Some speak of apathy. Quake jargon like ‘the rebuild’, ‘the recovery’ and ‘regenerate’ no longer tug at the strings of our imagination. Yet, according to the statistics thousands are still struggling with their insurers. Struggling Cantabrians feel isolated and in desperation have turned to social media for mutual support as the official channels do not assist them, nor solve their problems.
What are the factors that feed into why people bow out? I hear people blaming their fellow Cantabrians for their apathy. But is that a fair comment? I would like to list a few of the circumstances that might cause people to “give up”. My thoughts on what I call “recovery fatigue” are primarily meant as food for thought and I leave it to the reader to judge their legitimacy.
In the first instance, it is a devastating experience to see your house badly damaged or even completely destroyed by the earthquakes. The loss of one’s home is for most the loss of their former life. With the earthquakes many lost their sense of place. This causes people considerable grief. Those involved in grief counselling know that in the course of time people gradually detach themselves from the actual impact, and the loss their home had on their lives. This subtle process of detachment is a way of protecting oneself from the very impact of that event. As life goes on people have had ‘to let go’ in order to accept the new normal.
It may also happen that another incident draws the attention away from the distress of initial event. The event may have caused people to lose jobs. The loss of a job makes looking for work elsewhere in the country necessary. Moving away from the place where disaster struck, not only creates a physical distance, but it also creates a distance in the psychological sense. The disaster itself is no longer in their face, emotionally it now sits at an arm’s length. It can also be that the initial event is overshadowed by another devastating event. A family member may have become seriously ill or may have died. And that event overrides the mayhem caused by the earthquakes as people redirect their attention to another grave situation. Both events become “too much” to bear and people just give up. People bow out because they run out of financial resources. There are many stories of people who have had to accept a cash settlement, because they could no longer keep paying the rates, mortgage on their destroyed homes, while, at the same time, having to pay for alternative accommodation. This is a financial burden too big to bear.
After the earthquakes some affected Cantabrians were offered accommodation by generous friends or families. Of course this was meant as a temporary solution until the underlying issues were resolved. But as time dragged on, the generosity of family and friends may sometimes wear thin. They too want to carry on with their lives. Consequently the affected have had to look for alternative solutions, which are not always readily available. Some have even ended up ’living rough’ on the City streets.
The collapse of the social infrastructure in earthquake affected areas has deprived people of their community surroundings and amenities upon which they once relied. Services collapsed, schools and shops closed down. As neighbors (who once supported each other) began to move away, those who remained became even more isolated and deprived of the support of those who would have otherwise helped them ‘get through’.
As people age while waiting for a resolution, ageing itself can eat away at one’s resilience. The urgency of a proper resolution becomes even greater as one ages – because time feels as though it is running out for those who are in their later years. Urgency for resolution at the age of seventy, may be quite differently experienced from the way that urgency is experienced when one is edging toward 80. At that age people may have given up hope of seeing any immediate change in their situation. They may have different things on their mind and their priorities are reset. Many simply die waiting.
Nothing can have a more devastating effect on one’s motivation than the struggle that comes with not being fairly heard nor respectfully treated. One does not have to be an expert to understand the extent of the damage to one’s house. Most owners know the history of their properties well and are often well aware of the seriousness of the damage. The constant flow of expert reports, the reassessments of earlier assessments, the constant shift in costings, extended discussions between the insurers and strings of experts about whether or not the property is “over the cap” or “under cap” has driven many Cantabrians to the edge. Many feel exhausted by the delays this expert reporting process causes and many people find themselves in the position of having to constantly defend the degree of the damage their home has sustained over and against loss adjusters who see only historic or cosmetic damage – refusing to delve into the structural issues at hand. People have to seek legal action to get their issues properly addressed, driving up the costs for the homeowner. In a way it is as shocking as it is ironic that having disregarded earlier warnings and protests, EQC and the insurers now have to revisit thousands of homes to reassess and repair their shoddy repairs. This stretches the resilience of those affected even further, as their wait is extended potentially for another one or two more years. Many simply bow out, take a settlement and sell up to cover costs.
This tragic mis-alignment of expectations in Canterbury has led to serious disappointment amongst its residents. The lack of leadership regarding the recovery, the infighting between those in authority, between local and national government, the approach of the insurance industry to this disaster, the interference of CERA, the lack of a cohesive recovery plan based on the input by citizens, the way flooding issues have or rather have not been addressed, the handling of the people in the Red zone and the manner in which the reinstatement of many homes and businesses was executed, have seriously fallen short of what people in Canterbury ever expected. The responses to all those issues mentioned and the decisions made by the authorities responsible for the follow up were never clear-cut, but instead ambiguous and always left one with the feeling that they were serving another agenda other than the one of relating to affected citizens. This mismatch of expectations has been very exhausting and tiring, wearing people down. This no doubt drained the resilience of many Cantabrians over the past five years.
For the reasons noted above- social media began to play an increasingly important role. Not only could people blow off steam and get rid of their frustrations, but they felt that they were ‘heard’ and responded to. They discovered and became part of an online community that cared by sharing. No wonder social media has played an important, if not a critical role in helping Cantabrians deal with the complexities of quake recovery. Social media has filled the hole left by main stream media and earthquake recovery authorities.
Over time the recovery for many Cantabrians has become an ever moving target. That too is exhausting………no wonder people give up. Is it any surprise people accept settlements that leave them out of pocket? Others blame them for their apathy, but I for one, have come to understand this recovery fatigue many Cantabrians suffer from.
http://www.radionz.co.nz/news/regional/294612/suicide-related-calls-rise-in-canterbury
http://www.stuff.co.nz/the-press/news/74751713/Redcliffs-reflects-on-a-broken-promise
Cantabrians begin to tell the world…
How long did the New Zealand Government and the private insurance industry think it would take before Cantabrians began to publicize their plight internationally. 2016 will see a resurgence of activity from the affected population.
AVONSIDE HOLDINGS CASE A GOOD WIN FOR HOMEOWNERS by Dr Duncan Webb
Homeowners yet to settle with their insurer for their earthquake damaged homes have finally been given certainty in respect of contingencies and professional fees by the Court of Appeal judgment of Avonside Holdings Limited v Southern Response Earthquake Services Limited [2014] NZCA 483 (Avonside) released this week.
CONTINGENCY AMOUNTS PAYABLE
In Avonside, the house was a total loss and the insured elected under the policy to buy another house. The sum payable by Southern Response under the policy for this election was the cost of buying another house up to the “cost of rebuilding the same house on the same site”. The High Court had found that this did not include any contingency sum. Most building contracts will include such a sum to allow for costs which although not anticipated are very likely. The High Court considered that because there was no actual rebuild in a “buy elsewhere” election the amount was not payable.
The Court of Appeal determined that in calculating the rebuild cost of the house, a contingency amount was payable by Southern Response and the measure of professional fees payable was the actual costs required to rebuild the house on the same site. This amounted to an additional $271,200.00 payable to the insured, on the basis of a 10% allowance for contingencies and a 10% allowance for professional fees.
This is an important decision for homeowners, as insurers across the board have to date refused to include a contingency fee and a full allowance for professional fees as part of the calculation of the rebuild costs where the insured elected to buy another house.
While the case of Rout v Southern Response Earthquake Services Limited [2013] NZHC 3262 had earlier determined that insurers were to pay a 10% contingency fee for the “buy another house” option, insurers still refused to do so and maintained that the earlier High Court decision in Avonside (which held a contingency was not payable) was the applicable law. As the issue has now been unequivocally determined by the Court of Appeal, insurers should not be in any doubt that contingencies and full professional fees are to be included in the calculation of notional rebuild costs.
EXTERNAL WORKS NOT PART OF “COST OF REBUILDING THE SAME HOUSE”
The one part of the Avonside decision that does not favour homeowners relates to the amount payable for repairable outbuildings and other external works (such as driveways, fences, garages and paths). The argument advanced for Avonside was that the insured’s entitlement was to be assessed on the basis of rebuilding the entire “house” which was defined to include those external items. This was so whether those parts were repairable or not.
The Court did not accept this and held that if in the rebuilding process, an “as new” property could be produced by repairing and reinstating external works rather than rebuilding those items from new, then that is the way that the sum is to be calculated.
| Sophie Goodwin, AssociateDuncan Webb, PartnerLane Neave LawyersEmail: sophie.goodwin@laneneave.co.nz
duncan.webb@laneneave.co.nz Tel: +64 3 379 3720 Fax: +64 3 379 8370 |
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
A looming disconnect; what the 10 per cent game reveals- Guest Blog by Herman Meijburg
How long can one consider oneself a victim of a natural disaster? Is it forever? Is it valid to say that as long as you experience yourself as a victim you remain a victim of that particular event? I dare say that on entering our fifth year after the September 4 2010 earthquake Cantabrians can no longer consider themselves earthquake victims. We no longer have to recuperate from the aftershocks in the true sense of the word. Maybe we need to front up to the reality that, apart from a little tremor, the devastating and life threatening aftershocks themselves are history. Yes, we still carry the memories of people bonding together facing the devastation, the pain, and the loss of lives in those early days. They will linger. Those times will not be easily forgotten. But “over time” we have moved on. We commemorated the dead. We have named and honored those who lent us a helping hand in time of our greatest need. And to some extent it brought us closure.
Yet there is another “earthquake” story that is far from over. It is a story that needs to be told. Why? Because during these four years the ball game has drastically changed from Cantabrians coping with the aftermath of a natural disaster to a man afflicted disaster of some magnitude. Today thousands of Cantabrians find themselves in the crossfire between the opinions of the directives and the interests of local and national authorities, of conflicting assessments of their properties by their insurance companies; their assessors, structural engineers and quantity surveyors disagreeing with policyholder experts over the extent of damage and the costs thereof. At the same time another tip of an iceberg is emerging: an increasing number of shoddy repairs are appearing. And because of all this the propaganda surrounding the rebuild of Christchurch isn’t what it seems.
A date like September the 4th marks a good date to throw around some statistics. How well are we doing? The local newspaper informs us that Peter Townsend estimates that “just 10 percent of the rebuild is complete” (The Press, Sept 4th, 2014). That is a shocking statement, apparently we are not doing all that well at all! Mr Townsend is the CEO of the local Chamber of Commerce and is known for having a good and down-to-earth handle on the developments regarding the recovery/rebuild here in Christchurch. In the same article we are provided with the latest statistics on the rebuild. We learn from this article that “claims settled” does not necessarily mean that the repairs or rebuilds have actually eventuated. There is a big 40 per cent gap between “settled” and “complete”. What are we to make of this? With the words/phrases being used we are challenged to read between the lines. The Prime Minister, Mr John Key, recently visited Christchurch and was happy to announce during the Press leaders’ debate on Sept 2nd that the rebuild was now gaining momentum as 90 per cent of all claims had been settled. In short, if we take his word on the situation “we are doing pretty well in Christchurch”! Yet, another gap opens up, suggesting that only 10 per cent of all claims are unresolved. What constitutes the difference between the 90 per cent of the PM and the 10 per cent of Mr Townsend? We need to dig a little deeper.
How did Mr Key get to his 90 per cent? His figure is based on the recent numbers published by the Insurance Council and CERA and is composed of combining the number of claims “settled” (50 per cent) and the number of claims that had reached agreement with insurers but (that agreement) had not been completed (40 per cent). In total these two categories make up the 90 per cent Mr Key confidently referred to.
The Insurance Council considers that 40 per cent of the claims where agreement has been reached (although that agreement is still pending) as “resolved”. In fact these “resolved” claims are on the waiting list for cash settlements or for the reinstatement (whether it be a repair or a rebuild) of their property. “Unresolved” are the really difficult cases, they make up for the remaining 10 per cent of claims. So what we are looking at here in Christchurch is an immense problem. It is a gap of 80 per cent! That is the gap identified by Mr. Townsend and Mr Key. It is the gap between the 10 per cent of claims “complete” and the 10 per cent of claims which present a range of complex issues. The 80 per cent between those two 10 percentages forms a vast category of claims ranging from not being properly completed to claims which are resolved but where the agreement is still pending. That seems to be the true picture of “the Christchurch rebuild” 4 years after the September 4, 2010 earthquake. You don’t read much about that in the papers!
On different levels the consequences of this slow rebuild/recovery are multiple. Businesses move elsewhere, people wear out, give up and settle for less than they were entitled to. The numbers of claimants who accept a cash settlement outweighs the number of people who want a full reinstatement of their house – by far. Four out of five claimants accept and prefer a cash settlement. Some resort to advisory groups, others engage in legal action.
Many see cracks reappearing in the linings of their walls; indicating that the repairs may not have been up to scratch. We may be in for a battle to get the repairs of the repairs properly done. It is clear that these developments reflect increasingly badly on the behavior of the insurance industry toward their clients. In the same article in which Mr Townsend made his comments I quote Leanne Curtis from the Canterbury Communities’ Earthquake Recovery Network, that she has recently noticed “a breakdown of trust between claimants and EQC and insurers” (the Press 4th). And Vicky Hyde from the Insurance Watch is of the opinion that there “is still a lot simmering anger about how this whole thing has been handled”. The gathering organized by TVNZ3 at Shirley’s’ High School on September the 4, 2014 and attended by nearly a thousand claimants was testimony to that. As we wake up, many discover that after four years, we have become the victims of a man-made aftershock that will keep us struggling for the years to come. Gradually we start to understand that we find ourselves in a situation where Cantabrians live in two realities. There is a rift developing between those in Canterbury who got their lives sorted (or thought they did) and who have moved on and those whose lives are still on hold and will be for a longer period of time. I fear the consequences of a growing disconnect between the two. In terms of the recovery/rebuild, the rift between these two realities will gradually define the developments in Christchurch as a tale of two cities. This is shaping up to be a shameful chapter in New Zealand’s short history.
http://www.icnz.org.nz/canterbury-earthquake-insurance-settlements-top-12-billion/
http://www.stuff.co.nz/business/industries/10457378/Christchurch-rebuild-just-10pc-complete
~Future Proofing for a sustainable, participatory, democratic society.
https://thechristchurchfiasco.wordpress.com/about/
Time for a Peep Under the Rug
In terms of the most costly earthquakes on the planet since the 1950s, the Christchurch earthquakes were the 13th (Sept 4th 2010), 17th (Feb 22nd 2011) and 18th (June 13th 2011) most costly. (For a breakdown of the most costly see http://catastropheinsight.aonbenfield.com/Top10/Global-Earthquake-Economic-Insured-Loss-Events.pdf).
After the September 4, 2010 earthquake, the New Zealand current-account deficit (http://topics.bloomberg.com/new-zealand/) as a share of the economy, was reduced to a value near the smallest in a decade as local insurance companies received reinsurance payments from overseas. A catastrophe reinsurance payout is triggered if the aggregate of all of a reinsured’s policy claims arising from the defined event exceeds a specified threshold. This threshold works in the same way as the excess on a retail policy. The shortfall was 2.3 percent of gross domestic product in the year ended December 31, according to Statistics New Zealand. The gap in the year through September was revised to 2.2 per cent from a previously reported 3.1 percent. There was a NZD 3.52 billion deficit in the fourth quarter. At this point in time it was clear that the reinsurers would fund a good portion of the damage arising from the September 4 earthquake. However, finding information on reinsurance payments for the later Canterbury earthquakes is far more elusive. Establishing the facts remains difficult and more transparency here is definitely required. Whether the insurers will actually pay out all they were given, is even less scrutable……….particularly as we see a growing trend toward cash settlements.
Claims for reimbursement thus first affect primary insurers, but Reinsurers usually bear the lion’s share of insured losses when a large natural disaster occurs. They diversify concentrated risks among themselves and pass a fraction of the losses on to the broader financial market. It follows that the reinsurance contract between the reinsurer and the insurer will govern what information the primary insurer is required to give to the reinsurer with respect to claims. Just as good faith is the underpinning principle between the insurer and the policyholder, so it is between the insurer and their reinsurers. In order to avoid liability, the onus is on the reinsurer to prove bad faith or unprofessional behaviour in effecting settlement. Throughout the early months post earthquakes, in Canterbury, there were firms employed specifically by the reinsurers to assess and audit insurers’ decisions regarding quantum of damages in order to ensure that damage assessments are being carried out accurately and judiciously.
Everyone who has a rug knows perfectly well that if you don’t look under it now and again nasty things have a tendency to grow there. I suspect it is the same in the insurance industry. What I mean is that after more than three years of going slow, altering building standards, apportionment and other earthquake shenanigans, nobody appears to be peeping under the rug. Things may be festering and crawling down there. ‘How so?’ you ask. Well, you may remember that the nice reinsurance people who came over after the initial earthquake events coughed up billions of dollars to our not-so-nice private insurers, after they (the reinsurers) saw the size of our problem – our shattered buildings and our ruined infrastructure. ‘We’re going to have to rebuild all these’ said our local insurers, but since then- the word ‘rebuild ‘ has got messed-about with. The government decided it could save the Earthquake Commission a lot of money by introducing the MBIE Guidelines and fiddling with the essence of the Building Code, and by virtue of the EQC Act 1993, EQC were able to adopt it. “Hey that’s a good fiddle” said the local insurers, “why don’t we do this too. I tell you what, every time we engage an engineer to look at your property, we can tell them to just use the Minimum Standard Guidelines”. Many fat hands rubbed together and gleeful smiles lit up greedy faces. OK, reader, you’re asking ‘what’s this about?’ Actually it’s about what the private insurers were given by the reinsurers and what they actually paid or will pay out for repairs, and after three years, we want to know, who’s looking?
We and the reinsurers really ought to be looking because by my calculation the local private insurers are going to be paying out far less than they were given, unless of course some effective class action can be generated in relation to the fraudulent use of the MBIE Guidelines by the private insurers. That would be a game changer but in the absence of such legalities for now, it seems certain to me that the insurers will be looking forward to a very large ‘wind fall’ profit. And certainly recent information would prove that to be true. (Seehttp://www.stuff.co.nz/business/industries/9749259/Strong-profit-increase-for-IAG and http://www.stuff.co.nz/business/industries/9667134/IAG-plan-raises-competition-issues).
Should we care? Absolutely we should, because those are the funds that should have rebuilt our homes properly and not stuffed resin into broken foundations and packed out walls to make them ‘vertical’ again.
We know that in the early days some low-level auditing was carried out by the reinsurers – to see what the private insurers were doing – but given the huge delays, one needs to ask the question ‘is anyone still looking?’ Is anyone keeping the insurance industry honest? Reinsurers such as Aon, Swiss Re, Gen Re, Hanover Re, Munich Re, Zurich Re, all of whom have an interest in what’s happening here (there are some 30 reinsurers in total) really ought to take the time to come and check out the situation in this little backwater of the world.
In a global reinsurance market that has hundreds of billions to spend, the few billion that came into New Zealand is not big by global standards. But in terms of New Zealand’s gap it is a very significant amount of money. No doubt the Insurance Council will not agree but on the face of it there does appear to be a large discrepancy between what was received and what is being spent. And it is probably time that prudent reinsurers came back for a serious look at the situation and to establish what has and is really taking place. One of the problems of determining the true facts is the occluded nature of the negotiations between the private insurers and reinsurers e.g. when one earthquake event (September 4th, 2010) became three earthquake events ( Feb 22nd, 2011), and June 13, 2011) did the reinsurer pay out three times? The insurers might argue ‘that’s our business’ but I dispute that. It is everyone’s business. The insurers only ever held (hold) what they were paid, in trust, for the rebuild of the broken Christchurch money.
So what I’m saying is,“come on reinsurance industry it’s time for another (careful) look at what is really taking place in Christchurch. Look and let’s see what really happened and is happening, after all, the insurers may well have had three and a half years of interest on your/our money”.
Insured loss (Actual ) Insured Loss 2013 (USD)
September 4, 2010 3,100,000,000 3,200,000,000
February 22, 2011 13,500,000,000 14,200,000,000
June 13, 2011 1,800,000,000 1,900,000,000
From http://catastropheinsight.aonbenfield.com/Top10/Global-Earthquake-Economic-Insured-Loss-Events.pdf
Other resources
http://www.stuff.co.nz/business/8999552/Earthquakes-boost-insurers-profits
http://www.stuff.co.nz/national/christchurch-earthquake/4768223/Christchurch-earthquakes-drain-Commission-dollars
http://www.eqc.govt.nz/news/international-reinsurers-sign-up-to-eqc
http://thoughtleadership.aonbenfield.com/Documents/20130905_ab_analytics_re_market_outlook_external.pdf
~Future Proofing for a sustainable, participatory, democratic society.
https://thechristchurchfiasco.wordpress.com/about/
https://twitter.com/fiascofiles
http://www.facebook.com/thechristchurchfiasco
Beauty Heals: discovering creativity as a source of strength
Artist impression of Christchurch Cathedral by Sarah Miles
I shall start by acknowledging all those families who lost family members during the 2011 Christchurch earthquake, the many thousands who suffered injury, and the many thousands who continue with unresolved insurance claims.
Today marks the 3rd year anniversary of the 2011 February 22nd earthquake and it is a fitting day to begin blogging again after the 2013 Christmas/summer holiday break. Yes, I have taken several months of down time. I needed that, but I have not sat idle. I have been working on a couple of projects but now feel as though it is the right time to reignite and share my experiences over the last months.
I trust that everyone had a good summer break as well. I would like to thank all those (many of whom I have not met) who have emailed and called me over the past weeks (including calls from Australia, the Netherlands, the US and the UK) inquiring as to the progress of our claim and wondering whether everything is ‘OK’, what I’ve been up to and when the blog would spring into life again.
As many you know we still have an unresolved claim with IAG’s State Insurance, which has now extended to three years and five months as a result of the September 4, 2010 earthquake. We have a High Court case this year and we are working steadily toward that. Nearer the time I shall be happy to take up your many offers of support in that regard.
Today though, I want to talk about ‘coping’. It seems a fitting topic in light of the extended time frames for claim resolution and general lack of support from Government and insurers that many of us are having to deal with. I found myself initially reluctant to talk about this topic as I did not want to give those opposing our claim the pleasure of knowing that the whole process hurts and has profoundly affected our lives – but I have decided that on a day like today there are some things that should be shared and that the insurance industry and those who work in it should know just what they are responsible for. They should also remember that for many the battle is not over yet…
It takes incredible strength and determination and a survival strategy to get through such a long and deliberate process. At times I lose all three. So what keeps me going? In the down times while I’m waiting for things to happen, to progress – I get to creating.
In the early days I wrote a book, the research for this took up much of my time and took my mind off the awful things that were transpiring, affecting so many here in Canterbury. After the book, came the public talks and interviews and a year later, when things quietened, I found myself still face to face with the problem of my insurance claim. It was so painful at times that I simply had to find ways of distracting myself – distracting my mind from going round and round in circles, keeping me awake at night, leaving me in a permanent state of negativity. Miraculously though, in my distress, my body seemed to know what to do, seemed to know how to find a way of coping. I found myself furiously creating again.
In the process of the creation of art I am able to momentarily master, tolerate and minimize the conflict and stress. It equates to not much more than self distraction I guess. My art work has become prolific. Yes, art therapy is a well known methodology for coping with stress. But my art sprang from no intellectualizing on the matter. Rather it has been more of an unconscious process- it has been my physical self’s way of surviving, of protecting my mental self. And no matter how much energy I put into expressing some of my anger and sadness about the dishonesty in this City and about what has transpired over the past years into my art – I cannot – and my creations remain items of joy and beauty. In that beauty which illuminates what I am creating – comes healing. Perhaps it’s a way of overcoming the terrible dualism in this painful process. It’s a way of obliterating the negativity and darkness I experience when dealing with the insurance industry. I have been surprised and amazed by my own output. It flows through me and out of my fingers. Creation after creation after creation. It leaves me thinking that it is no accident that so much art has appeared in the City – all expressions of people coping in whatever way they can. And what a wonderful way to cope.
Winds of Hope by Sarah Miles
So what have I been making? I have been making handmade fabric ‘hope boxes’ and the space around me is slowly filling with my ‘hope’ boxes. These boxes for me represent my ability to compartmentalize, A place of storage for my resilience. While I paint, stitch and sew, my mind calms, my thoughts focus on what I’m doing and the disruptive world of dishonest insurance disappears for a time. I have made artistic representations of the Canterbury Cathedral, of the Cardboard Cathedral, square shapes, hexagonal shapes, pyramids and the list goes on (see photographs)- all things of great beauty to me – items that are so removed from the world I currently inhabit. These items of colour and texture bring me peace, solace and great hope – hope that one day this situation will be resolved for all of us affected by the events here in Canterbury and that I and my family and that you and your families will be able to move on with our/ your lives. We need to do this in the clear knowledge that the system has to change.
Each of us finds our own way of dealing with stress – exploring and relying on my creativity is mine. Throughout the past three years I have noticed my tendency to disengage from my social circles, to withdraw to lick my wounds on my own. In creating my art forms I connect with a deeper space, the true essence of myself, a place I inherently trust, in an environment where trust often seems hard to find.
So at this time I want to acknowledge the many thousands of claimants in Canterbury who still have unresolved claims- my heart-felt wishes go out to you all – for many this time represents the battle of a life time, for others this period in their lives represents an extraordinary loss in personal freedom and financial equity. I experience the way in which the insurance industry is dealing with its policyholders as a total disregard of our human vulnerability.
And on that note I would like to congratulate the Southern No-Response group for the community efforts you have made in keeping your plight front stage and centre – a stirling effort for which I have no doubt there will be results. Your actions remind me of the old adage ‘united we stand divided we fall’. (See http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/9709084/Unhappy-claimants-meet-over-Southern-Response and https://www.facebook.com/SouthernNoResponse).
I hope for all those who find themselves in a similar situation to my own that you remember that you have other resources, a universe of beauty, that you can mobilize in order to survive, and prevail – just give it a go!
African Delight by Sarah Miles
For those of you who have similar stories of finding ways of coping please share your stories – I would be happy to publish them.
https://www.redcross.org.nz/what-we-do/in-new-zealand/helping-in-canterbury/
~Future Proofing for a sustainable, participatory, democratic society.
https://thechristchurchfiasco.wordpress.com/about/
“On Track”: More Insurance Spin! – Guest blog by Herman Meijburg
The recent data published by the NZ Insurance Council (NZIC) about the residential repairs and rebuilds are an interesting read.
At first sight the data sketch an optimistic picture, but statistics require “close reading” in order for us to understand exactly what 
information we are looking at. On March 1st 2013, I posted a guest blog on the Christchurch Fiasco website dealing with the latest figures on the residential rebuild as presented by Michael Wright in the Christchurch Press. In comparison with those statistics we now seem to have a more accurate account of the number of damaged homes in the greater Christchurch area, some 172,100 (over and under cap)! That is 61,241 more than I calculated in February 2013. It shows that the property problem is actually bigger than I anticipated at the time. As a consequence of this rise in numbers the number of properties managed by EQC and the insurers has also gone up: today 147,100 properties are “under the cap” and 24,660 “over the cap”. These figures represent a significant change from those we were provided with in February 2013. The first conclusion is that we probably now have better data to draw conclusions from today- which is a gain. It also reveals that the number of properties damaged by the Canterbury earthquakes is much larger than initially thought. An explanation for this jump in numbers could be that in February 2013, some two and a half years after the initial quake in September 2010, many properties were still waiting to be assessed. This prolonged delay came as a shock and at the time caught the attention of the media. Hence, when the EQC claims management system was exposed by a whistleblower in April 2013 (See http://www.stuff.co.nz/business/rebuilding-christchurch/8469811/EQC-privacy-breach-affects-83-000), Ian Simpson (EQC chief executive) had to apologize publicly and promise to get all outstanding claims properly assessed within a 6 month period. (Seehttp://www.3news.co.nz/Keeping-EQC-to-its-word-in-Christchurch/tabid/817/articleID/306947/Default.aspx#.UnlVEcr2-os). This may account for the substantial rise in numbers.
As of 1st of October 2013, we now know that by the end of the third quarter of 2013, 24,660 properties were insurer-managed; that is 6,160 properties up from the February 2013 statistics! Of those 24,660 properties some 41% have had their claims resolved. How have the insurers resolved those claims? They did so by rebuilding 650 properties (3% of 24,660), repairing 590 properties (2% of 24,660) and resolving 8,760 properties “externally” (36% of 24,660). “External resolution” refers to any situation in which the loss incurred is resolved outside the project management office controlled by the insurance company. This means that the resolution for the property is no longer under the insurance company’s remit. This includes cash settlements and house reinstatements. On the basis of these figures we can draw more conclusions. First of all, that up through to the third quarter of this year the insurance companies have had a 5% direct, hands-on involvement in the repair/rebuild of residential properties. This in sharp contrast to the 36% of properties in which an external solution was achieved. Offering cash settlements or house re-instatements means that the insurance companies walked away from any direct involvement, mitigating any future risks for themselves and leaving the property owners to deal with the aftermath of that resolution. This is a trend we are also seeing in EQC repairs. In the report prepared by the Controller and Auditor-General, Earthquake Commission Managing the Canterbury Home Repair programme, the writers state that “In our view, increasing the use of cash-settling to meet this deadline could be counter to the objectives of the home-repair programme if it contributes to cost inflation or the offer to cash settle is made to a homeowner who does not have the capacity to manage repairs on their own.” “As at August 2013, the home-repair programme would need to average about 2250 repairs each month to be completed by the end of 2014. This calculation assumes that EQC will not cash-settle large numbers of remaining claims. (See http://www.oag.govt.nz/2013/eqc/2013/eqc/docs/oag-earthquake-commission.pdf).
We now have enough information about the aftermath of those kinds of settlements. They often leave the property owner many hundreds of thousands dollars out of pocket, unable to rebuild their home ‘like for like’. I suggest you read the recent guest blogs by Arian Cowie and Kevin Seque on this matter.
As property owners have become aware of this “settlement” tactic and other external resolutions of the insurers, the number has dropped considerably amongst the category of properties “with the resolution still in progress”. In only 2,600 cases external resolutions are being sought; that is only 11% of the 24,660 properties in comparison to the 36% of the properties which had their claims resolved in the third quarter of this year. In line with this lower outcome for external resolutions the figure for insurers managed repairs and rebuilds has gone up considerably. Insurer managed rebuilds in progress went up to 3,840 properties (16% of 24,660) and insurer managed repairs in progress went up to 4,490 properties (18% of 24,660). Added together the insurer managed repairs and rebuilds comprise 34% of the properties with resolution in progress i.e. not yet completed.
Insurers involved in the Canterbury rebuild add the number of properties which have had their claims resolved and the ones with resolution in progress together, claiming that 87% of their over the cap residential property claims have been either fully completed or have an agreed resolution in progress. On the basis of this percentage the insurers say they are on track to meet their 2016 deadline when all earthquake claims are set to be resolved. But when looking at the number of claims resolved by the end of the third quarter of this year, the 1,240 repairs and rebuilds done represent only 5% of the 24,660 claims. The 34% of insurers managed repairs and rebuilds in progress may well present the insurers with a big problem. In numbers the 8,330 repairs and rebuilds in progress as opposed to the 1,240 repairs and rebuilds done means that that in the forthcoming two years the insurers have to do nearly 7 times more repairs and rebuilds than they have done through the 3rd quarter of this year. It is not going to happen in the timeframe insurers have set for themselves. This for obvious reasons I mentioned in my previous blog. Repairs and rebuilds will pose more difficulties; they will be more complicated and will need more redesign work. Managing insurers will be confronted with complicated consent procedures to meet the revised building codes and during that period building costs will continue to rise and labour will become more scarce.
We haven’t mentioned the 3,420 properties (14% of 24,660) without confirmed settlements options which include 540 properties without any kind of offer yet. Nor is there mention of the numbers of people involved in legal proceedings- of which there are at least 250 homeowners. I take it that all these 3,420 properties will be resolved in one way or another. If we take the line that most of these properties will eventually be “insurer managed” repairs or rebuilds, the insurers would have to do nearly 9 to 10 times as many repairs and rebuilds in the years 2015/2016 than the insurers achieved through the 3rd quarter of this year. That means that the insurers will need to do well over 300 repairs/rebuilds a month till the end of 2016 (39 months). The Insurance Counsel figures state that in the last three months of this quarter they completed 540 repairs/rebuilds which equates to 160 repairs/rebuilds a month. (See ‘We’re on track say insurers’, Ashleigh Stewart, The Press, Nov 4, 2013). If they are to achieve these figures -as of today the insurers will need to double their efforts otherwise they will not meet their 2016 target. In turn we, the affected public, will keep track of whether the insurance companies actually deliver on the goals they have set for themselves. Otherwise their statistics are just another smoke screen.
Related articles
- http://plainsfm.org.nz/on-demand/mornings-Sarah-Miles-nov6/
- http://www.stuff.co.nz/the-press/news/9357702/Insurers-insist-they-re-on-track
- http://www.stuff.co.nz/the-press/opinion/9366106/EQC-report-echoes-long-standing-complaints
- Brownlee defends EQC performance (stuff.co.nz)
- Auditor-General says EQC inconsistent in Canterbury (radionz.co.nz)
Herman Meijburg, West Melton, November 5th, 2013
Labour’s KiwiAssure raises some questions too.
As I mentioned in my previous blog there are some very important questions for Labour to clarify and answer regarding their proposal to revisit the way we insure our homes and businesses in the future in relation to Labour’s new KiwiAssure. It is difficult to assess their ideas about KiwiAssure without having a more complete view of what it is they are proposing. At present the information is coming through in dribs and drabs, but based on what I have seen thus far I think it would be fair comment to make by people who suggest that for a government to simply own ‘another’ insurance company is hardly productive of any significant outcome in terms of national disaster preparedness. I count myself in that group. We need to know therefore, whether Labour proposes to simply offer insurance to anybody who wishes to purchase it from KiwiAssure or whether they’ll do the sensible thing and go the whole distance and make disaster insurance compulsory for every property and business owner under the proposed KiwiAssure scheme. As I have set out in my book (The Christchurch Fiasco: the Insurance Aftershock) there is a very good reason to operate a compulsory scheme for home and business insurance. A few of those reasons are as follows:
1. A compulsory scheme will ensure maximum financial input and therefore rapid growth of the Natural Disaster Fund which cannot be obtained if KiwiAssure is just another insurance company abstracting profits;
2. The elimination of profit, if not extracted from the scheme – gives a huge advantage in terms of the speed with which the Natural Disaster Fund will be replenished and would rapidly become more than capable of dealing with even the most substantial event;
3. All income and funds raised through premiums would not disappear ‘abroad’, but would remain within New Zealand;
4. We would not have to bail out undercapitalized failing private insurers such as AMI, Western Pacific and Ansvar;
5. From our recent experience we know that post disaster, foreign owned corporates will never have the empathy for the people of New Zealand;
6. It would provide the ability to control premiums and there is some potential for future reduction in premiums or dividends once the fund becomes well established and fully operational;
7. A national scheme would provide the government an on-going opportunity to negotiate directly with the reinsurers. This, in light of the fact that, with the apparent ever increasing adverse weather events worldwide, reinsurers will be looking to governments for indications of how they intend to respond and mitigate the damage done by these reoccurring catastrophes. In this scenario there will be no need for the ‘middlemen’. By cutting out the private insurers the government can deal directly with the reinsurers and control our own disaster preparedness more cost effectively;
8. The scheme would provide New Zealand with the opportunity to develop universal standards for damage survey, criteria for assessing and costing of that damage and the evaluation in terms of rebuild or repair – something which has been so sorely lacking throughout the recovery process post Canterbury earthquakes;
9. The permanence of the scheme would mean that the population could rely on a long-term, multi-term relationship with the elected government of the day and trust that catastrophe insurance does not become a ‘political football’ at election time;
10. As there exists a large body of knowledge in New Zealand to better understand the vulnerabilities and the consequences of living in an earthquake prone country, it is better equipped to calculate its risk than international re/insurers. Thus the chosen risk transference structures will be more transparent under my proposed scheme as there would be direct accountability to policyholders;
11. It would also avoid the uncertainty of capital markets in the current global environment and the potential for systemic risk.
If Labour do not seize this opportunity to take control of disaster management on behalf of the people, there may be some validity in Mr. Grafton’s (Insurance Council New Zealand) statement that with the proposed scheme Labour is ‘simply plucking low hanging political fruit’, (although Mr. Grafton appears to have overlooked the fact that the insurance industry grew the fruit which has become low hanging for the political taking. If they had done a decent job, there would be no fruit to pick!). Hopefully Labour’s ambitions extend somewhat further than that!
If it is true that Labour is simply picking some low hanging fruit there are still some questions that need to be asked. What does the Labour proposal encompass? What are the tasks and the responsibilities of KiwiAssure? In my opinion the answer to most of those questions will revolve around the efficiency of KiwiAssure in comparison with the abysmal performances of both EQC and the private corporate insurers. How can Labour convince us that KiwiAssure will perform better than EQC or Southern Response? There are more than enough insurers in New Zealand without the addition of yet another company which has no significant advantage and there would appear to be little point in going down this road, unless, of course, it is the first step in a somewhat bigger ambition. It might be quite sensible to create an insurer and get it working first, before establishing it as the only real estate insurer. Is Labour being a bit coy about this??
But my question to Labour in respect of what they have announced is in what way does KiwiAssure improve the situation in respect of national disaster management, it appears to add nothing if it is simply another standalone insurer- be it state owned and operated? And what about the role of EQC itself? Presumably EQC will continue to extract their levy and continue to provide us with the dismal performance that many of our citizens are still suffering, into our four year post-event. The practises of EQC now appear to be as corrupt and as inefficient as the corporate insurers. When I wrote my book it was my opinion that a restructured EQC might have been capable of managing the Natural Disaster Fund better, but in light of subsequent experience I believe that EQC in it’s present form should be abandoned altogether. Labour’s choice of KiwiBank might be a very good vehicle upon which to base an insurance subsidiary both equipped and capable to manage a Natural Disaster Fund and all the responsibilities associated with that task. Labour will need to address these issues before “selling” KiwiAssure to the public as the final solution to our geographic vulnerabilities.
However I don’t believe simply following the trend of bancassurance is enough (See https://thechristchurchfiasco.wordpress.com/2012/11/04/what-is-bankassurance-sometimes-spelt-bancassurance-2/). In fact there is a growing trend toward separating these functions out rather than integrating them further. The more integrated banking and insurance becomes the more at risk both systemically and financially the rest of us are!
I look forward to hearing more about Labour’s proposal and I trust they remain open to discuss and improve upon their ideas- after all- this affects each and every one of us and the opportunity is too good to miss!
~Future Proofing for a sustainable, participatory, democratic society.
https://thechristchurchfiasco.wordpress.com
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CASH SETTLEMENTS BEWARE – Guest Blog by Kevin Seque
There is a major danger looming for the building industry – and in turn you the Homeowner
Insurers have started and I predict, will aggressively move in 2014 to cash settle as many claims as possible.
Because of the slowness of Insurers to settle the claim, the frustrated, stressed and impatient customers, many will take these cash settlements without consideration for the escalation allowance between the time of accepting the settlement offer and the time the construction contract being accurately priced and signed, the unseen damage and un-costed foundations coupled with potential hyperinflation in materials and labour as the recovery accelerates through 2014/15.
From the claims I have settled, to date my experience shows that homeowners have no concept of the time involved in the preparation work required to get a house to the “on site builder’s hammer” stage. Most home owners are unaware that an “easy” build (single level 3-4 bedroom up to 200-230 square metres on a level site with easy access takes on average, currently a minimum of six months from a “standing start” (this is when you are advised you are a rebuild, and the amount you have to spend on your new home).
You need to engage an architect/draughtsman to discuss and design concepts, then arrange engineer designed foundations, geotechnical report, and survey, once these reports are received they are then incorporated into working drawings and submitted to Council. For Aurum’s applications in Wellington, permits are received within 15 working days for architecturally designed homes. In Christchurch, Aurum is allowing and working on a 55 day turnaround to obtain a permit.
For you the homeowner there is a major risk for unfunded cost overruns as the repairs or rebuilds (in contradiction with the policy terms and principals of Insurance settlement) are only being scoped to a “notional” claims position rather than to actual cost. Insurers and their PMO’s are making “best guess” allowances for foundations, particularly in TC3, and cost overruns can be $ tens of thousands of dollars out. Recent foundation examples that the KSL Audit / Aurum building system has assisted;
A St Albans TC3 claimant $94,000, a Halswell TC2 claimant $38,000, a TC2 Papanui client $52,000 and a Green Hill, Mount Pleasant client $18,000.
A rebuild offer for a Redcliffs client of $245,000 on completion of all of the plans and settlement (time lapse 9 months) resulted in a rebuild cost of $343,000 and there will be a foundation allowance overrun still to be negotiated.
A St Martin’s TC3 client had a $54,000 additional foundation overrun.
A Papanui rebuild of $386,000 eventually was agreed by the insurer at $482,000 and has only now been settled as the foundations and framing are now in place on this TC3 site and there has been no foundation cost overrun.
A Cashmere client was offered $440,000 and has recently settled for $592,000.
A St Albans Claimant’s repair was costed in 2011 at $320,000 and after KSL requested an escalation update was offered $406,000. Aurum have advised KSL the same repair has been costed at $440,000.
A Parklands resident had been costed as a repair at initially $217,000 then on review increased to $274,000 and the actual builder’s costed repair is $396,000.
If you are intending to self-manage your rebuild (which will allow you to build in whatever style, construction, design or size without betterment) make sure you get professional advice on how and when to settle your claim or you could end up being unnecessarily, financially disadvantaged. None of the Banks are displaying any concerted effort to assist clients who wish to self-manage, so are likely to have little appetite for greater risk and advances through cost overruns.
Builder defaults.
Even on a fixed price contract the builder is not liable for additional engineering or foundation issues. If the builder takes on a direct customer and there is a foundation cost overrun the builder will not know that a “potential” customer default will occur, until they are at least two thirds of the way through the build.
Whilst the customer may have paid for the cost overrun at the time that the foundations were laid, they may not have sufficient capital to fund the full project, necessitating mortgagee sales, additional finance issues resulting in delays and costs and could financially destabilise the building company.
Ensure you take professional advice from a qualified Insurance Claims Advocate and /or Legal Adviser who understands the building industry at the “micro” (nuts and bolts) level if you are considering a “Cash Settlement” and intend to be a Self- Managed rebuild.
Written by Kevin Seque 43 years insurance industry experience.
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