This document discusses issues with the earthquake claims process between public (EQC) and private insurers. It notes insurers aim to settle claims at or below their loss reserve amounts. It also highlights confusion caused by different types of insurance coverage (indemnity vs. replacement). The document provides tips for policyholders to understand their rights and avoid being taken advantage of in the claims process.

1. 1. Minimisation
2. Policy vs policy
3. Confusion
4. Public Perception
5. The Wild West
6. The Dryer & the Deep Freeze
7. Experts
8. Regulatory Capture
9. Top 10 Tips

2. Public Insurer = EQC = EQC Act
Private Insurer = State, AMI, BNZ, ASB,
Tower, Westpac, Lumley, FMG, MAS =
Private Insurance Policy
Both are INSURERS

3. 1. MINIMISATION

4. Loss Reserve
–the name of the game is
get claim settled at or below
your Loss Reserve

6. “What I do know is
that we can expect
90% of claims to be
under the EQC’s
$100,000 cap”
Tim Grafton, Insurance Council of NZ
3 December 2016

7. 2. Policy/Act vs
policy

8. Insurers have policies
that minimise your
entitlements under
the Insurance
Policy/Act

9. The lesson insurers learnt
from Christchurch was ‘get
in, assess and settle quickly
and get out’ before folks
start understanding their
actual entitlements
= MOU

11. MOU Clause 3:
“Acting in
Accordance with
the EQC Act”

12. “3.1 In this MOU the phase “in
accordance with the EQC Act”
and similar references means
in accordance with the EQC
Act (Policy) as interpreted by
EQC (policy) and notified to
the relevant Insurer”

13. MOU Clause 10:
“EQC policies”

14. “10.1 EQC will provide Insurers
with policies as to how it
applies the EQC Act (Policy)
and Insurers are entitled to
rely on such policies (as
updated and notified to the
Insurers in writing from time to
time)”

15. “No policies, as described in clause
10.1 of the Memorandum of
Understanding Relating to Kaikoura,
exist at this time. Accordingly, your
request for this information is refused
under section 18(e) of the Official
Information Act: that the document
alleged to contain the information
does not exist”
EQC OIA response 1 February 2017

16. Your Private Insurer is just acting
as an agent for your Public Insurer
for damage less than $100,000.
If you are having trouble with
your initial assessment – go
straight to EQC – they are the
ones you have a Policy with.

17. 3. CONFUSION

18. INDEMNITY COVER
VS. REPLACEMENT
COVER

19. INDEMNITY:
“An indemnity policy puts you
back in the same financial
position you were in prior to
the loss occurring, so that you
are no better or worse off than
you were immediately before
the loss”

20. REPLACEMENT:
“This is a policy under which
an insurance company will
replace a lost or destroyed
item with a new one, or
repair the item so it is as
new as practically possible”

21. EQC Dwelling
Cover is
REPLACEMENT
COVER (‘as new’
not ‘same as’)

22. “Minor repair costs very
rapidly escalate beyond the
EQC residential building cap of
$100,000 plus GST”
EQC’s Engineers – Tonkin & Taylor – 1st Report dated October 2010

26. “Kaikoura's worst-hit residents
fear their decimated land may
also be written off, and the
Earthquake Commission (EQC)
is yet to determine how it will
settle the region's land claims”
ChCh Press 17 November 2016

27. 4. PUBLIC
PERCEPTION

28. “Claims were settled
to standards of
individual and overall
fairness perceived as
acceptable by the
public”
EQC Review May 2009

29. 5. THE WILD
WEST

30. - Fair Insurance Code
- Insurance and Financial
Services Ombudsman Ltd
- Financial Services
Complaints Ltd
- Breakthrough Services
- Residential Advisory Service

32. 6. THE DRYER
& THE DEEP
FREEZE

35. GATE 1 = INDENTIFY,
AGREE AND DOCUMENT
DAMAGE CAUSED BY EQ
THEN
GATE 2 = AGREE METHOD
TO REPAIR OR REPLACE

36. 7. EXPERTS

37. “10.9 Engineering Services…Any
engineering services procured by
an Insurer for the purposes of
assessing or reaching a Settlement
decision must not be provided by
a person or a firm that EQC has
advised the relevant insurer that
EQC does not wish to obtain
services from”

38. 8. REGULATORY
CAPTURE

39. “In Policy/Act
Resolution” vs
“External
Resolution”

40. In Policy/Act:
1. Payment of Cash Equivalent reinstatement costs
“As incurred”?; or
2. EQC/Insurer Managed Reinstatement
“Reasonably Sufficient”?
3. Indemnity Cash Payment
External Resolution:
1. One off negotiated cash payment to go away

41. In Policy/Act: (20%)
1. Payment of Cash Equivalent reinstatement costs
“As incurred”?; or
2. EQC/Insurer Managed Reinstatement
“Reasonably Sufficient”?
3. Indemnity Cash Payment
External Resolution: (80%)
1. One off negotiated cash payment to go away

42. “Before the quakes
everyone wanted to avoid
a building consent, now
that EQC and insurers are
paying everyone wants
one”

43. TOP 10 TIPS:
1. If their lips are moving then they are lying to
you. It’s not personal – its business. Get it in
unequivocal writting (no might’s, maybe’s, if’s or
but’s)
2. Pick on the big issues, these are the most
likely to move their pre-determined Loss
Reserve.

44. TOP 10 TIPS:
3. Understand your Insurance Policy/EQC Act
and then ask for and understand their policies
on interpretation of the Policy/EQC Act – they
can be very wrong and tend to make and change
policies on the fly!
4. In my experience don’t step out of “Policy”
until the last minute, your stated intentions
mean a lot.

45. TOP 10 TIPS:
5. Figure our your settlement strategy
as soon as you can, this isn’t their first
rodeo, but it will be yours.
6. Public perception is everything to
the industry, use the media as a
community

46. TOP 10 TIPS:
7. Don’t give them control of experts and
experts instructions, or the Council!
8. Treat “free dispute resolution services” with
some caution.
9. Decide early on if you have it in you to
withstand the Dryer – sometimes hanging out to
dry can be less painful and you get the same
result!

47. 10. IT’S UP TO
YOU!