EQC have updated some of the information pages on their website. Click on the name to go to the page: News and updates Scorecard (latest statistics) Perhaps most important is EQC’s request that those with contents claims for which EQC are still awaiting information, to provide a completed Schedule of Contents form and any supporting documentation by the 1st of March (here). .
The final report of the Queensland Floods Commission of Inquiry was released on the 16th of March. At just over 650 pages it provides extensive cover of the events and consequences of last year’s floods.
Significant insurance issues arose during the Inquiry, which covered them in some detail in Chapter 12 Performance of private insurers, including:
12.5.3 Timeliness of internal dispute resolution
12.6 Communication with policy-holders. In this area the submissions to the Commission raised a number of issues about communication. Complaints included the following:
- Insurers had dissuaded policy-holders from making claims.
- When they telephoned their insurers, policy-holders spent long periods of time on hold or could not get through.
- Insurers had not provided regular information about the progress of claims and had not returned policyholders’ phone calls.
- Insurers had told policy-holders, incorrectly, that their claims would be covered when they called to lodge claims.
- Insurers had not provided a single point of contact: policy-holders had to deal with different staff at different times.
- Insurers had, in some instances, treated policy-holders less than professionally or compassionately. Insensitive or inappropriate remarks had been made to some policy-holders.
12.6.1 Multiple case managers
12.7.4 CGU’s desktop assessment process
12.8 Information to policy-holders whose claims were denied
12.9 Internal dispute resolution
The Commission’s recommendations regarding insurance are reproduced below. Neither New Zealand private insurers nor EQC are close to following the Commission’s recommended practices and some action is needed to push them in the direction of this better form of practice.
12.1 When a policy-holder makes a claim, the insurer should ascertain the policy-holder’s preferred method of contact and ensure that it is used (with other modes of communication if necessary) to keep the policyholder informed about the progress of the claim. However, important decisions regarding the claim – for example, determinations about the outcome of the claim and settlement sums – should always be confirmed in writing.
12.2 Insurers should review their existing systems and processes and implement any improvements necessary to ensure that accurate and complete records of conversations with policy-holders are made.
12.3 Letters notifying policy-holders that their claims have been denied should, at a minimum, state the information upon which the insurer has relied in making the decision. These letters should also advise policy-holders that copies of the information will be made available upon request (in accordance with clause 3.4.3 of the General Insurance Code of Practice) and indicate how policy-holders can make a request.
12.4 The Insurance Council of Australia should consider an amendment to Part 3 of the code which requires insurers to notify policy-holders of the information on which they relied in assessing claims.
12.5 The Insurance Council of Australia should amend clause 3.4.3 of the General Insurance Code of Practice so that it requires insurers to inform policy-holders of their right to request a review of an insurer’s decision to refuse to provide access to information on which it relied in assessing claims.
As an aside, one of the worst performing insurance companies was CGU, part of IAG (Insurance Australia Group) – see Chapter 12, e.g. pages 287, 288, 308, 310. As well as property insurance CGU is a player in the provision of workers compensation in Australia. IAG NZ (a wholly owned subsidiary of IAG Australia) has links to New Zealand through State Insurance, NZI, Lantern Insurance, and the non-earthquake side of AMI. Names to watch for the future?
A particularly interesting account is the interaction between CGU and one of its customers: Sallyanne Doyle. Over a number of pages the Commission recounts Ms Doyle’s battle with CGU, its dubious methods, and inadequate staff (especially the CEO). Gripping stuff, especially for those who have had a few encounters with EQC. The main bit starts on page 315 but the important background starts a few pages earlier.
Like many others we have adopted a lateral free-range filing system over the floor in the living room and garage. While that is my preferred natural state, at some time much of it will need to go back to the shelves. Chances are there will be a big wobble shortly after and it will end up on the floor again.
Gail has found a company SRNZ (Seismic Restraints NZ) that sells bits and pieces for keeping stuff in place during a shake. Some of the items look pretty useful, and in later times when excesses have gone sky-high may save a lot of hassle and money.
Their website is here and they have a catalogue and price list on-line.
Most are familiar with the High Court declaratory judgement instructing EQC that the total cost of claims must be apportioned over the number of claims lodged. As it happens, the Court’s decision has a serious unintended consequence for some claimants.
Where a house is a “rebuild” or requires major repairs, and no single claim breaches the cap, the claim cannot be passed to the private insurer. As a consequence EQC becomes responsible for the rebuild or repairs.
The following, which focuses on rebuilds, is specifically about those in the Red Zone but the underlying EQC as insurer issue also affects many in the Green zones.
Where a house is in a residential Red Zone the owners are given two choices: Option 1 or Option 2.
- Option 1 is to take the rateable value for both the land and house.
- Option 2 involves taking the rateable value of the land and settling with your private insurance company for the building(s). Those whose house is written off are entitled, by their policy, to have a new house built.
The problem arising from the High Court Judgement involves Option 2. The steps in the scenario are:
- EQC assess a house.
- It is agreed to be damaged beyond economic repair – a rebuild.
- Apportionment is applied correctly.
- Even though the house is a rebuild no single event exceeds the cap.
- Because the cap has not been exceeded the “file” will not be passed to the private sector insurer.
This scenario is likely to arise often with houses at the lower end of the value scale (rebuild value < $250,000 +/-). Through the judgement EQC is the only insurer in a position to cover the policy on the house.
The consequences for the homeowner are unclear, but potentially financially damaging.
Had the claim been passed to the private insurer then a rebuild would have been available as part of Option 2. It is not stated whether EQC will stand in the place of the private insurer for Option 2. As EQC is the insurer in other regards, it seems very clear that they pick up all the private insurer policy obligations.
The absence of publicity about this from EQC or Gerry Brownlee suggests there is no desire to have EQC face these costs, perhaps in the hope those in this situation will be diverted into taking Option 1. As the cost of a rebuild will be significantly higher than rateable value, taking Option 1 will mean a financial loss to homeowners and a gain to EQC.
The Crown Offer policy and documents were drawn up before the apportionment matter went before the High Court in Wellington. The Declaratory Judgement makes no decision (or comment) on how apportionment is to be carried out, nor on the effect it is to have on insurance policies. Consequently the Judgement cannot be used to deprive anyone of the rights they had prior to it being issued (the Judgement was purely about who paid for what, with policy entitlements not up for consideration).
As mentioned above the Crown Offer, and the policy behind it, was developed and promulgated prior to the declaratory judgement. The environment that gave rise to it has changed substantially, and in an unanticipated way, while the content remains the same.
How it is worded and operates need to be revisited to ensure that it continues to accurately reflect the legal situation, and does not deprive or deceive claimants of and about their legal rights. In particular it needs to state that EQC is an insurer in its own right under Option 2, for those who wish to consider that choice and are under-cap.
Clarification is needed that any legal right to a rebuild is not removed by the apportionment judgement or process, and that EQC will stand as insurer under Option 2. Those who are undercap through apportionment, and have been sent offers, should be sent amended offers. If such clarification is problematic then the matter needs to go to the High Court for another declaratory judgement.
An Official Information Act (OIA) request has been sent to CERA about this. Don’t hold your breath while waiting for the response. CERA don’t seem greatly influenced by the Ombudsmen’s requirements for the prompt handling of OIA requests.
The following experience is from yesterday’s Avonside Community Group newsletter.
I live in Retreat Road and wanted to share my experience with EQC today over our February contents claim as a warning for others.
We were sent the contents settlement detail with a value for each of the items and a total claim value (less than $20,000), however a depreciation value had been taken off all of the items one year old or greater; including our TV, stereo, chainsaw, plates, glasses etc. The reason give for this was that our contents insurance policy was market value only and therefore there was a depreciation factor that applied. For example, a mantlepiece clock that we had valued at $100 and 10 years old was depreciated by $50 leaving a payout value of $50, and our stereo which we’d valued at $300 and aged at 10 years was depreciated down to a payout value of $0.
I thought that this depreciation thing was strange as it hadn’t been taken off when our contents claim from September was settled so I called the EQC to ask about it. They explained that they had taken the depreciation off in line with what our insurance policy was and therefore what our insurance company would do. I quickly checked our contents insurance policy and it clearly said that we had replacement insurance and I explained this to EQC. However, they said although we had replacement insurance the value of our contents would still be depreciated to market value. They were adamant about this and wouldn’t budge even when I read the policy details out to them over the phone and said that we hadn’t had depreciation taken off the September claim. I got off the phone pretty disillusioned having had about 60% wiped off the value of our claim and wondering why we had insurance in the first place.
I thought about it for a bit and called State insurance to check with them about the interpretation of our policy and explain what had happened with EQC. They were great. They got straight onto it and called EQC with me on the other line at the same time, making it very clear to EQC that no State wouldn’t take depreciation off contents with a replacement policy (except for things like clothes that wear and also computers). EQC subsequently said they will correct their error.
So a long story but I just wanted to share it so you can let others know. I don’t want anyone else to get caught out in the same way by EQC.