Residential Red Zone offer feedback sought

CERA is seeking feedback on their Preliminary Draft Residential Red Zone Offer Recovery Plan. Comments must be submitted by 5.00pm on the 19th of May. The Draft plan starts off by explaining the “why?”.

The purpose of developing the ‘Residential Red Zone Offer Recovery Plan’ is to assist the Crown (through the Chief Executive of the Canterbury Earthquake Recovery Authority (“CERA”)) to determine whether it should make new offers to buy vacant, commercial and uninsured properties in the residential red zone and, if so, how such offers should be structured.

However, before the plan there has to be a draft plan.

This is the Preliminary Draft Recovery Plan, notified for public consultation on 5 May 2015. This Preliminary Draft is the first opportunity for everyone to provide their views. You do not have to be an affected property owner or live in greater Christchurch to have a say. This public consultation is an important first step. The Preliminary Draft is in essence a discussion document, which sets out the key contextual information and developments. It focuses on the key questions the Crown will need to consider about the vacant, commercial and uninsured red zone properties, and it asks for your views. It does not predetermine what any final Crown offer will
be.

A copy of the draft plan is available here and you can make an online submission part way down the page here. There are two pages of information designed to explain what is happening and why. Click on the page name shown in red to go to that page.

  1. Public to have say on red zone offers – background to the court case over payments to some living in the Red Zones, the court ruling, how this process is designed to ensure all who are affected (directly or indirectly) and how to have your say.
  2. Questions and Answers – a series of questions, with supporting answers, to help clarify what is going on. The questions are:
    • What was the decision made by the Supreme Court?
    • What is a ‘Recovery Plan’?
    • What is the Residential Red Zone Offer
    • Recovery Plan – Preliminary Draft?
    • Why do you need me to comment?
    • Will this Recovery Plan decide what the offer will be?
    • What happens next?

The Cabinet Paper setting up this exercise is here. .

A plan followed by consultation for the outstanding red zone Crown offers

Earthquake Recovery Minister Gerry Brownlee has decided that everyone can have a say on what level of pay-out should be provided to those in the Red Zones who have been ineligible so far (uninsured owners of land and property).

It is hard to tell whether the Minister has suddenly been overcome by a desire to indulge in participatory decision making or it is a device to allow public participation to be used as a shield for yet more delays followed by the same decision as before. The news release is reproduced in full below. The original is available on the Beehive website here.

Release Date: 21 April 2015 Canterbury Earthquake Recovery Minister Gerry Brownlee has announced a process to give everyone a say on the Crown offers to owners of vacant, commercial/industrial and uninsured properties in the Residential Red Zone. “I have asked the chief executive of the Canterbury Earthquake Recovery Authority (CERA) to prepare a Recovery Plan that looks at the offers to property owners in these categories,” Mr Brownlee says. “Following a legal challenge by the Quake Outcasts group, the Supreme Court directed that the decision on the offer to properties in these categories should be revisited and that a Recovery Plan was an appropriate approach.” Owners of properties in these categories in the Port Hills red zones have not yet received an offer.  An offer will be made to them on the basis of the outcome of the Recovery Plan but will not be less than the offer already made to those in the flat land red zones.  Consideration will also need to be given to those who did not accept the earlier offer and those who had a reduced offer as a result of significant underinsurance. “The Recovery Plan process allows us to consider the different options, and for people to give their views based on what it means for the property owners, as well as the taxpayer and how people insure their properties,” Mr Brownlee says. “If the process results in a larger revised Crown offer from that which has expired, then those owners who accepted the original offer will be eligible for a top up of their payments. “There will be two stages of public input through written comments in the development of the Recovery Plan, and CERA will be publicising those opportunities. “Following the analysis of the public input and advice from officials, I expect the Recovery Plan to be finalised and decisions made in relation to the Crown offer by the middle of this year.”

Fair Insurance Code Questions & Answers – Part 2

Why is ICNZ so keen on having a Fair Insurance Code, and prickly over criticism directed at the Code?

At an operational level the Code is a useful means of providing a standard approach to offering, selling and administering insurance. This has benefits to insurers as they want customers to have a feeling of ease and security in buying and keeping insurance. It works quite well, with New Zealand having an extremely high uptake of insurance which, in turn, means significant revenue for insurance companies.

At the political level the Code is one of the means used by insurers as they work to prevent or obstruct legislation to regulate the insurance industry. Unrestrained self-regulation is their on-going goal, and the Code is the part of the public face of how they go about it.

Prior to the earthquakes insurers operated without public scrutiny and there seemed to be no shortcomings (unless you dug deep). Should the fairness and suitability of the Code now be successfully challenged then the future of the current level of self-regulation becomes uncertain, and the preferred form of business-as-usual threatened.

The loud and frequent post-earthquake requests for more legislative change and oversight of the conduct of insurers is the crux of much of what is motivating insurers in this revision of the Code. They fear legislative change will put limits on their freedom to operate in a way that is highly favourable to them.

Click on the link to continue

FAQ 7 is the industry’s response to requests for more legislative oversight of how insurers carry out their business. It is reproduced in full, with comments after each paragraph.

FAQ – 7: Some critics have said that while it’s fine to improve the Code, but what is really needed is legislation. What’s ICNZ’s response?

Clearly, it would be ludicrous to suggest service standards be legislated on for insurers or for that matter any business in New Zealand.

ICNZ’s choice of words (service standards) appears to be a careful one. The implication is that calls for legislation solely concern service standards akin to legislating for how tables should be waited upon in a restaurant. What has been called for is legislation to make insurers externally accountable for the integrity and quality of the way they do business.

So, why would it be ludicrous to change the law and require better conduct of insurers?

On Thursday the Minister for Commerce and Consumer Affairs (see yesterday’s blog) showed it wasn’t ludicrous, with a proposal to extend the dollar amount of a claim that can be considered by the independent dispute resolution services. Such a change would provide huge relief, as far fewer customers with valuable claims would face the expensive and daunting prospect of taking insurers to the High Court.

A few paragraphs below there is mention by ICNZ of  insurance legislation in both Australia and the UK that is mimicked in part by the Revised Code, so how is it ludicrous just in this country to pass laws to protect customers from insurers behaving badly? The Consumer Guarantees Act 1993 has provisions covering services which could be enlarged to include insurance and The Fair Trading Act could include provisions regarding unfair practices.

When the conduct of insurers in the US (e.g. New York Times Hurricane Katrina article here and Hurricane Sandy here), Australia (e.g. Queensland floods here) and New Zealand (Canterbury earthquakes) are taken together there is a clear pattern of “offending” through bad, unfair and sometimes dishonest behaviour. It would seem a matter of some importance to individuals and small businesses in New Zealand that there are clear statutory protections from a pandemic of bad insurance behaviour.

Where there has been most focus on legislation has been what to do about insureds who do not disclose information to insurers which lead to the voiding of the insurance contract. In some instances, it has been argued that insurers have used non-disclosure or irrelevant facts to avoid contracts unreasonably. ICNZ Members are committing to act reasonably when responding to non-disclosures by the insured.

The overseas legislation, not specifically arising from the experience of natural disasters, has been concerned to protect customers who, for honest reasons, were found to have omitted or overlooked information the insurer deemed necessary or material. There have been issues concerning non-disclosure but the wording above is pejorative – insurers have treated a failure to disclose as a wilful act on the part of the customer. This provides a convenient opportunity to reduce or deny the claim by the insurer, who has a strong incentive to pay as little as possible on claims.

In some cases non-disclosure has been the result of a failure to understand what was required or a failure to anticipate what the insurer didn’t specifically ask for. The consequence has been a “punishment” out of all proportion to the mistake made. As there is no statement of what constitutes acting reasonably there can be no certainty that current practices will not continue under the guise of being found to be reasonable.

The post-earthquake experience is larger than this and includes the failure of insurers to fulfil their side of the contract. To repeat the list from the pervious post:

  • ill informed, poorly and badly behaved staff and agents
  • the use of some assessors who were inadequate to the task
  • indecisive decision making
  • inability of insurers to communicate in a sensitive way
  • reluctance of insurers to release information to customers
  • reluctance of insurers to comply with dispute processes

What we have done in the Code is to acknowledge changes in UK and Australian law which essentially limit the ability of insurers to avoid contracts altogether and require them to respond reasonably to non-disclosure. The Code picks this up by requiring insurers respond reasonably to non-disclosure, so we effectively move toward the legislative changes elsewhere. The independent Dispute Resolution Schemes and ultimately the Code Compliance Committee become the arbiters of what is reasonable.

This is not good enough. Moving towards is not the same as being there. There can be no certainty that the Dispute Resolution Schemes will be competent to decide what is reasonable – what basis or guidelines will they use, how will they reach their decision, will customers be able to attend the consideration of their case or will it be done behind closed doors?

There is little openness in the way insurance disputes are processed either within the industry or via the Dispute Resolution Schemes – it is all done by people at desks in the absence of the customer. The courts’ system (specifically the Disputes Tribunal) should be the model of participatory dispute resolution even if it is a private sector scheme.

Not all insurers are members of ICNZ so the Code does not apply to them. This would support an argument for legislation. ICNZ does not see any immediate sign of legislation on the horizon, but if it effectively reflected the approach we have taken in the revised Code, we would not object to it.

As ICNZ members write more than 95% of all fire and general insurance policies the Revised Code covers everyone who matters.

ICNZ would not object to legislation if it did no more than what is contained in the Revised Code? This is not a concession. What is required is far more than what is provided for in the Revised Code and fierce opposition can be anticipated.

Non-ICNZ Members aside, in our view a self-regulatory code of conduct administered by independent dispute resolution schemes is just as effective as legislation at regulating whatever standards are set.

This is a view ICNZ is entitled to hold, but not a view that would survive more than cursory investigation. The legislative issue is not just about regulating whatever standards are set, it is also about setting some of the standards as well.

One area where standards need to be set via legislation is that of the content and meaning of the “hard parts” in policies – the fuzzy words such as fairly, honestly, transparently, material (preferably with reference to the Principles of the Privacy Act), and codify the concept of “utmost good faith” as it applies to both parties.

Why? As far as interpreting insurance policies are concerned, insurers are very strong advocates of the Humpty Dumpty Position:

“When I use a word,” Humpty Dumpty said, in a rather scornful tone, “it means just what I choose it to mean – neither more nor less.”
(Through the Looking Glass – Lewis Carroll )

This form of conduct needs to be stopped, and only legislation will provide the level of integrity and openness needed to ensure that there is clarity and consistency in the operation of insurance policies.

 

NOTE: There is a statement (end of the third paragraph) “The independent Dispute Resolution Schemes and ultimately the Code Compliance Committee become the arbiters of what is reasonable.” That seems unworkable. The ISO, and most likely the CCC, are bodies that can consider only what is contained in a policy document. Unless the document contains a definition of what is reasonable then are they entitled to create one? As the ISO, and again presumably the CCC, do not have hearings or allow customers to participate in deliberations will this be a process devoid of natural justice?

A helpful change to the insurance disputes process coming up?

Yesterday Paul Goldsmith, Minister for Commerce and Consumer Affairs, announced  the opening of consultations on changes to the maximum amount that could be taken to the insurance industry’s disputes resolution services (the full media release is below). The change proposed is an  “… increase to the cap on the compensation that dispute resolution schemes can award in relation to disputes about real property insurance claims. The proposed increase is from $200,000 to a minimum of $350,000.” Post-earthquake, only disputes up to $200,000 could be considered by the insurers’ independent dispute resolution services. Beyond that amount disputes had to be taken to the High Court, an action too expensive for most people. Insurers could have agreed to have larger amounts considered, but this did not seem to happen. As a consequence many homeowners were, in effect, coerced by insurers into a take it or leave it situation. At the time there was significant demand for the cap to be raised. The government’s proposal is in two parts. The first is to increase the maximum amount to at least $350,000. The second is to back-date eligibility for access to the amended amount to 2010, allowing those currently in dispute with their insurers to avoid the High Court process. Full details are in a document on the MBIE website here. The submission process is relatively straight forward. MBIE require submitters to use a template (available on their website here). The document has a list of 15 questions they would like your answers to. Download it, fill it in, and e-mail it back to them. If you think you might want to give it a go, but aren’t certain about the questions, give me a week or so to finish with the revised Fair Insurance Code and I will go through the submission questions. Those wanting to make a submission have until 5.00pm on the 9th of April (Thursday after Easter) to make a submission to the Ministry of Business Industry and Employment. Information about the submission process is here.   Back to the Revised Code FAQ tomorrow. Click the link to read the media release. 5 March, 2015

Consultation open for proposal to improve access to insurance dispute resolution schemes

Commerce and Consumer Affairs Minister Paul Goldsmith today announced the start of public consultation for a proposal to make dispute resolution schemes more accessible for homeowners in dispute over insurance claims. “We are considering making dispute resolution schemes more accessible by increasing the compensation cap from $200,000 to $350,000 for property insurance disputes,” Mr Goldsmith says. “Under this proposal, dispute resolution schemes will be able to consider cases where the insurer and the customer are seeking to resolve a claim discrepancy of up to $350,000. “Currently disputes over $200,000 must be referred to the High Court, which many people may not be able to afford.” “Dispute resolution is an independent, less formal and cheaper alternative to the Court system.” “This proposed change would enable more effective and faster resolution of issues, and in particular should help move forward some of the unresolved disputes in Canterbury. The public will have until 9 April to submit on the proposal, with any resulting increase in the compensation cap being made in mid-2015. Anyone with a dispute dating back to August 2010 will be able to take advantage of this change. “The upcoming review of the Financial Advisers Act and Financial Service Providers Act will provide the opportunity to consider the role of the dispute resolution schemes and their jurisdiction more broadly,” Mr Goldsmith says. For more information visit: http://www.med.govt.nz/business/business-law/current-business-law-work/approved-dispute-resolution-schemes-minimum-compensation-cap-for-insurance-disputes/

Avonside photography project – Official opening of Thx 4 the Memories

Yesterday was the official opening of the Avonside photography project Thx 4 the Memories. I was invited to speak on behalf of Avonside, and the following are my notes which were pretty closely followed. What was said didn’t cover everything, but seemed right for the day. The things left unsaid are raised further down.

To Tim Veling, Bridgit Anderson and Glenn Busch (who is in France) For your integrity, insight, perseverance, sacrifice, ability and especially your circumspection you have no equal. Thank you very much. What you have achieved is a revealing, sensitive and intimate record of individual participants in a tragic event. Each record is an eyewitness account of the earthquakes and their aftermath. Collectively these accounts are something that will soon become tomorrow’s history. An important part of the historical record. Having said that, history is a perverse thing. Understanding other peoples’ history, in a different place or a different time, seems reasonably clear-cut. You can read about it, or watch a documentary. Important facts are laid out, key figures make their explanations, conclusions are easily reached. When you live in the middle of an historical event nothing is clear. We who live in Canterbury are experiencing the unfolding events quite differently to the way others measure or describe them. The important facts, key explanations and easy conclusions seem very distant from what we see and experience. So, what is the truth of our earthquake aftermath? Please look at the photographs and read the stories. For every Barbara, Judy or Shane, or any of the people who took part, there are hundreds and perhaps thousands of similar stories from those who have struggled in the Red Zones, and are struggling in the Green Zones and on the hills. Please read the stories, look at the people and where they lived. Hopefully you will find for yourself some of the truth of the times we have shared since the first earthquake. Thank you.

Of course there is much more to the truth of what has been experienced than that alluded to above. Many of the stories raise additional issues which I will try to summarise here. The first distorter of truth was the Christchurch City Council with it’s arrogant ineptitude, and inability to see past a  ‘business as usual” approach in a culture of non-disclosure. Insurers, their assessors, and the Insurance Council of New Zealand have espoused values and views we cannot understand from our perspective. Many of their truths are a dismissive contradiction of actual experiences. The government, Minister Brownlee’s office, have delayed and withheld, and continue to delay and withhold the release of information. At times there was the pretence we should be able to work it out for ourselves because it is “blindingly obvious”. Yet, what we can clearly see, what we experience day after day, the things that at times harm or destroy us, are carefully and wilfully unnoticed by them. Being unnoticed, there is no need to correct problems, or support those who are struggling. Being unnoticed there is no need to talk with communities about what is needed for a successful recovery. Their truths too are a dismissive contradiction of our experiences. Then there is EQC, the great Satan in our midst. What can be understood of all this? What is happening? Time and again, in my struggle to understand, the words of the late Justice Peter Mahon come to mind: an orchestrated litany of lies. So, what is the truth of our earthquake aftermath? Again, please look at the photographs and read the stories. That is where the truth is. .