The EQC recently announced that its payout cap will be doubled from $150,000 to $300,000 plus GST from October of next year - a move which will add an estimated $207 a year to homeowner’s premiums. However, Clark said that customers outside of high-risk areas such as Wellington, Canterbury and Hawke’s Bay should see a drop in their premiums, as the decision reflects an ongoing industry move towards risk-based pricing.
“COVID has shown us how important it is to have the appropriate support available when disaster strikes,” Clark said.
“We want New Zealanders to have access to affordable residential property insurance, and to ensure that as many people as possible can repair their homes if they are damaged by a natural disaster.”
“This change means the government, through the EQC, will take on a greater portion of risk - I’d expect to see insurers reflect this in their pricing for residential property insurance purchased by New Zealanders after October 2022,” he explained.
“If insurer pricing doesn’t behave as expected, the government is open to considering options such as a competition study to give customers assurance that the market is competitive.”
The EQC covers for natural disaster damage as a result of earthquakes, volcanic eruptions, geothermal activity, landslides and tsunamis, with the remainder of each claim being paid out by private insurers. The decision to increase the cap is part of ongoing changes to the EQC Act, which are being made following Dame Sylvia Cartwight’s report on the public inquiry into the EQC.
The report detailed the struggles that claimants have faced in disaster recovery, and highlighted its data management, training, staffing and ‘double handling’ of claims as just some of its major issues.
Minister David Clark said that he expects to make further changes to the EQC Act over the coming months, with a Bill updating the legislation expected to be introduced early next year.
Third party claims administrator Gallagher Bassett, which has worked with the EQC on its claims handling, said that there is “always the opportunity” to further improve the claims handling process, and the focus now should be on investing in technology and educating the public around the EQC’s function.
“I think there’s always the opportunity for further improvement in the claims process, but one thing that springs to mind is whether the general public is clear on who they should be calling in the case of an event,” New Zealand CEO Craig Furness said.
“This is likely more of an issue if you have small, localised damage as opposed to a larger scale event - but if that happens, does the general public understand that their insurer is going to be handling the land damage as well as the insurance policy, and that the EQC doesn’t need to be involved?”
“I suspect that a lot of that has gone straight over the heads of the general public, as a lot of them haven’t felt that they need to understand that,” he explained.
“So over time, I think a bit of education for the public in terms of how they’re going to be looked after in these kinds of circumstances would probably help.”
The collection, storage and sharing of data was also one of the key issues raised in Dame Cartwright’s report, where she highlighted its “outdated, incompatible technology and systems” and “poor data handling practices.” Furness said this will be a key area for EQC to focus on going forward, and that good investment should significantly improve the experience of claimants.
“When it comes to improving the claims process, we ourselves always strive to make great use of technology in terms of assisting with, managing and assessing claims,” Furness said.
“We think the sector does need to invest in the kinds of tools that are constantly emerging. The more of the insurance market is able to use this kind of technology effectively, the better it will be for the customer and their overall claims experience.”
