Reforming the EQC

Monday 26 June 2017

Clarification of whether homeowners can look to their insurers, rather than the Earthquake Commission (EQC), to manage natural disaster claims should be in new EQC reforms.

By Miriam Bell

The government today announced reforms to the EQC Act which are intended to simplify and improve the EQC scheme for those affected by future natural disasters.

Under the reforms, everyone with a private insurance policy, that includes fire insurance for their residential building, will continue to receive EQC cover.

Earthquake Commission Minister Gerry Brownlee said the reforms will have no impact on existing EQC claims, but will help provide faster and smoother resolution of claims following a major event.

One of the reforms will require EQC claimants to lodge claims with their private insurer who would then pass the claim on to the EQC.

Brownlee said this would help EQC and private insurers to work together better in future.

However, the Insurance Council wants a clearer indication of whether insurers will be responsible for assessing and managing claims for house damage.

Insurance Council chief executive Tim Grafton said they believe insurers should be responsible for assessing and settling all house claims.

This is what has largely happened in response to last year’s Kaikoura earthquake.

Grafton said the worst outcome would be if the law requires all claims to be lodged with insurers - but then that information has to get passed to EQC to assess the damage and manage the settlements for customers.

Insurers want to make the process to be simpler and more efficient for their customers, not more complicated, he said.

“So, we seek clear direction from the Government to EQC that insurers should be responsible for assessing and managing claims broadly based on the Kaikoura model.

“This will ensure we avoid the situation that occurred in Canterbury where insurers were advised by EQC some years later that the building cap had been breached and that they now had to manage the claim.”

Other reforms include an increase in the monetary cap from $100,000 to $150,000 for EQC building cover; standardising the claims excess on EQC building cover at $1,000; and the removal of residential household contents insurance from the EQC.

The reforms also clarify that EQC land cover is for natural disaster damage directly affecting the insured residence or access to it.

Grafton said this means there is some form of land compensation in addition to the building cover via the EQC.

“Where land damage has occurred separate funding to the building cover is available to fix the land or access to the property, so the house can be repaired or rebuilt.”

The Insurance Council also wants the standard of repair that homeowners receive to be the same as that in their insurance policies irrespective of whether the damage is above or below the EQC cap.

The newly announced reforms come hot on the heels of the Budget announcement that EQC levies will increase from 1 November.

However, work on a final draft of the EQC Reform Bill continues and the Bill will not be due for release until later this year.

Read more:

Budget boost for tenants 

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