How Has the EQC Performed Following the Canterbury Earthquakes?
How would the EQC cope, when faced with the monumental task of managing nearly 400,000 claims from two major events in close succession? That was always going to be a tall order. Nearly one year on from the Greendale fault rupture, what can we say about the EQCs performance?
Unsurprisingly, the EQC has struggled to cope, and have been facing increasing criticism on several issues following the Christchurch earthquakes, including:
â€¢ withholding contractor payment for repairs (article here)
â€¢ length of time to process claims (article here)
â€¢ duplication of effort within EQC, and with private insurers
â€¢ lack of communication with homeowners and contractors
While I expect that the EQC had every intention of addressing the concerns raised in the 2009 review (see previous post here), I doubt that there was sufficient time, political will or funding to actually make any meaningful changes prior to 4 September, 2010. Not surprisingly then, many of the concerns raised in the review have come to fruition (my personal experiences relating to each point in italics):
ïƒ˜ duplication of effort between the EQC and private insurers has caused major bottlenecks and delays. Some 80,000 claims have been delayed due to insufficient information provided by homeowners (nzherald.co.nz, 26 July). In many cases the repair estimates from private insurers and the EQC have not been in agreement, presumably because they have not worked together or shared information.
My personal experience:
- we have been assured by every assessor that has visited our home that we are over the $100k EQC cap. If that is the case, why wouldn’t the EQC just pay us out, and pass the claim onto our private insurer? Instead, both the EQC and private insurer are still individually going through their lengthy assessment processes and audits, rather than working as a team.
ïƒ˜ Excessive assessments, inspections. Is it necessary?
My personnel experience:
- EQC: 3 “quick” assessments, 2 full assessments
- Private Insurer: 3 preliminary assessments, 2 full assessments, 1 flooring assessment
- Fletcher Building: 1 quick emergency assessment, 1 unsolicited visit for emergency repairs (repair work already done ourselves)
- Structural Engineer: 1 inspection
- CCC fire service: helped to remove badly damaged and unsafe chimney, thanks!
So, that’s about 14 inspections since the September earthquake, and we still haven’t had a stitch of work done other than what we’ve done ourselves, seen any resolution from EQC or our private insurance company, or even been told what to expect! We just want to get on with the repairs!
ïƒ˜ Why aren’t some contractors getting paid? Stories persist of contractors going out of business as they struggle to get paid for EQC work. Insurance companies refuse to reinsure businesses, citing the risk of further damage to buildings from aftershocks. This is further crippling the rebuilding process (article here).
My personal experience:
- Our structural engineers report was submitted in October of last year, and as of last week they say they still hadn’t been paid for that work by the EQC.
ïƒ˜ Communication: Very few people have actually been able to get any meaningful answers from the EQC. There isn’t any “shop front” where people can go and speak to a real person about their problems, instead they spend countless hours on the phone (mostly on hold), trying to get answers. In fact, the EQC brand isn’t anywhere to be seen these days, as the EQC logo seems to have been removed from most personnel and vehicles. Is this so that EQC workers don’t have to front up to an angry public? The other day I noticed an otherwise nondescript white car with two fellows aboard wearing high viz vests. In tiny black letters beside the registration plate was written “EQC 21″. How quickly the EQC has adopted a low profile in Canterbury.
My personal experience:
- Despite calling and emailing the EQC some 40 times, we do not seem to be any closer to resolving our claim. Each time we speak to a different person (of first name only), and never have we been assigned a “case manager” who understands and looks after our unique claim. We have been promised a return call or email by many of these well-meaning EQC people, but not one has ever actually followed through with that promise. Weeks, perhaps months of our lives have been dedicated to just trying to get answers.
ïƒ˜ Claim Processing Time: what is an acceptable time frame? Is 6 months, or a year an acceptable time frame given the circumstances? Is it fair to take that long to process a simple contents claim, and still ask homeowners to hang onto high-value damaged items as proof of ownership?
In fairness to the EQC, it’s in all of our best interest for them to be thorough and fair when it comes to processing claims. We don’t want them to be wasting our premiums on fraudulent or unfounded claims. But there must be a balance between efficiency of settling claims, and scrupulous auditing, especially when resources are stretched to the limit, and the task at hand is so enormous. Shouldn’t the EQC be working with the insurance industry to streamline the claims process? Surely the cost of crippling the rebuild process will be far greater than a few missed audits. I hope that the EQC learns from this experience, and improves their efficiency for future major disasters.
What Does the Future Hold?
As a homeowner in Christchurch, I have found the claims process to be frustrating. However, I accept that there are thousand of other people who have much greater issues than I. Homes can be repaired or rebuilt, but many others have lost family members or friends. As a Natural Hazards and Disaster scientist, I can appreciate that most of us are very fortunate indeed. It is clear that the Canterbury earthquakes are an opportunity to better understand and prepare for future large disasters in New Zealand. That opportunity extends to all of use, from the scientific community, to local and central government, and the general public. We can, we should, and we will be better prepared for the next major natural disaster in New Zealand.
Following today’s shocker announcement by the government that the Canterbury earthquakes are now expected to cost the EQC $4 billion more than expected, it is now apparent that the EQCs $6 billion reserve will be decimated. Just a few days ago it was reported that there would be around $2.5 billion of that reserve left, plus a further $2.5 billion of reinsurance for future events (article here). Todays announcement by ministers Bill English and Gerry Brownlee has increased concern about the long-term viability of the EQC’s Natural Disaster Relief Fund. Despite retaining a AAA credit rating, the EQC faces rising reinsurance costs, with all of their four primary reinsurance contracts due for renewal by the end of 2013, and this with effectively no assets to leverage, other than government gaurantees. This raises questions about how the EQC will replenish their coffers. Is an earthquake tax or levy the quickest way to build reserves back up to at least 2009 levels, so that the EQC has the capacity to cope with future major disasters? Reserve levels should be restored relatively quickly – let’s not forget that an Alpine Fault or Wellington earthquake, a major volcanic eruption, or a tsunami could affect New Zealand at any time, and it’s always better to save up for a rainy day than to have to borrow to pay for it. So, it seems an inevitable consequence that our EQC levies will rise substantially, and I would be surprised if an earthquake levy isn’t on the cards. Perhaps the incumbent National government will wait until after the election to announce such a tax. But higher EQC premiums and tax increases are not all bad.
A Wonderful, Rich, and Active Land
The major economies of New Zealand, including tourism, dairy and mining are a direct consequence of living in this wonderful, active landscape. Our collective wealth was born of fertile valley bottoms and alluvial plains, rich volcanic soils, and abundant fresh and coastal waters. Our mountain ranges are uplifted by tectonic forces just as steadily as they are eroded and weathered by wind, rain and ice, bringing mineral wealth near the surface, where we can exploit them. Our varied and spectacular landscape facilitates one of the world’s most important tourism industries, despite our relative isolation. This active landscape is an important part of what makes New Zealand unique and special. Therefore it should come as no surprise when hazardous natural processes occasionally affect our lives, and we should prepare for those instances as best we can. I for one can accept higher EQC premiums or tax increases, knowing that we are preparing for the inevitable natural disasters of the future.
Where Would we be Without the EQC?
In other disaster-prone areas of the world, where publicly-owned EQC-equivalents do not exist, private insurance companies are reluctant to expose themselves to the additional risk associated with many natural disasters. Disaster insurance is therefore very limited, very expensive, or both. In California for example, natural disaster insurance can cost several hundreds to thousands of dollars per year, and commonly carries excesses of 10-20% of the insured value. That means paying an excess of $20-50k or more in the event of a major disaster, consequently many homeowners choose to bear the risk themselves and forgo natural disaster insurance altogether.
The inadequacies of relying on non-disaster-specific insurance in disaster-prone areas was clearly evident following the costliest natural disaster in US history, 2005′s hurricane Katrina (over 1300 dead and US $108 billion damage). The majority of homeowners in the Gulf region did not carry separate flood insurance, and the insurance industry declined many claims on the basis that damage was caused by flooding, rather than by wind or wind-driven rain. The resulting anger, fear and uncertainty amongst those hundreds of thousands of people without flood insurance was finally addressed with an unprecedented disaster-assistance payout by the US federal government.
Here in New Zealand, we thankfully have some certainty. Homeowners have been paying into the EQC pot for decades, spreading out the financial impact of a future major disaster. That “rainy day” has finally come, and the Natural Disaster Fund is being called upon. Despite all the headaches of dealing with insurance claims, and the slow pace of assessments and claim settlement in Canterbury, I am very glad that we at least have some peace of mind, knowing that the EQC is there. Let’s hope that New Zealand’s EQC remains strong and committed to responding to natural disasters in the future, and that we all learn from and build upon the lessons of this past year.