After several years in disaster and recovery, insurance professional Melissa Heath thought she needed to do something about underinsurance – in her own unique way.
Heath has been in the insurance industry for nine years and most of those years have been spent working on the recovery of residential properties after the 2011 Christchurch earthquake. Now she is the director of Residential Risk Analysis (RRA), a company she built to help potential home buyers determine the risk factor present on the property they are looking to invest in.
Insurance Business had a chat with Heath and asked her about her company. She says her team members are handpicked based on their previous earthquake insurance work history and the understanding they have of the relationship between natural disaster risk and insurance.
That knowledge, she says, is a potent tool to help those who are buying, insuring and financing homes – both in earthquake affected Christchurch and all other areas of New Zealand.
In this Q&A, Heath talks more about her company and her thoughts about underinsurance.
I worked at IAG for nine years, rapidly rising through the ranks to earthquake claims team leader – initially leading the shared property programme teams and then the Marlborough/Nelson area team after the Kaikoura earthquake.
Working in the claims department for a general insurer exposed me to virtually every peril that a residential home can be affected by. When the Christchurch Earthquake Sequence (CES) began, we were all forced to become experts on earthquake damage and all the different mechanisms that moving earth can employ to damage property. Over 100,000 homes were damaged to varying degrees – all within 43 seconds.
Unlike an approaching hurricane or cyclone, an earthquake gives no warning or time to prepare and with such a blanket spread of damaged dwellings, the experience forced me to rapidly hone my skills of thinking on my feet. Additionally, the sheer magnitude of the job at hand sharpened my skills of thinking outside the box to find a way through to a solution for claimants.
I have always had an enquiring mind and I’m bit of a polymath with my ability to retain knowledge over a wide range of subjects and interests, however, my time at IAG in Disaster Recovery effectively strengthened my investigative skills. This set me on a course of trying to help people avoid all the pitfalls that were exposed (during the CES) and magnified in such a large disaster; and was the reason for forming my company.
I learnt so much and became such an ardent advocate for insurance that I chose to become qualified and am now a Senior Associate of ANZIIF with a diploma in general insurance. I passed with flying colours and special mention of my investigation skills.
When the opportunity arose to work in insurance, the desire to help people in their darkest times again became a driving force and I was able to employ my skills gained from caring for wounded people to help people devastated by large physical losses. Once the CES began, I too joined the unending ranks of homeowners dealing with a broken home and I was able to understand completely what our clients were going through.
As this is such a serious matter – the risk profile of the home your children sleep in at night – I am writing a guide book on effective pre-purchase due diligence so that all home buyers, not just my clients, can do their homework on the suitability of the home they are falling in love with. I expect it will be published in the next six months.
The pleasure I got in finally hearing that a client had moved into their newly repaired or rebuilt home, having had them as clients for years, was always tear inducing.
There are bad memories of those who were so incredibly abusive, rotted the system and fleeced the insurance companies with behaviour that was almost criminal.
I have a couple of particularly good memories of helping policy owners escape the clutches of so-called “advocates” who leech huge sums of money off our clients in return for slowing or completely stagnating their claims, on the premise of getting a better pay-out. I had to convert suspicion and anger about their insurer (cultivated by the advocates) into trust of our processes, and, by doing so, the clients were able to rapidly have their claims resolved and their new homes built.
But the standout memory for me and what elicits the most pride for me was my involvement in the development of the Shared Property Programme. From meeting groups of co-owners face to face with their individual insurer representatives and explaining to them the what and whys to seeing the project through to completion was incredibly satisfying – a real career highlight.
Residential Risk Analysis Ltd examines the history of the property and dwelling, as well as looking at its potential exposure to natural disaster risk. Effectively – digging what has been its past and looking what is in its future. We don’t look at structural integrity – we leave that to the building professionals.
Additionally, as we are in a post-disaster environment, we have a unique issue in Christchurch, where houses are sold in a damaged state. A majority (about 66%) of homeowners have taken a cash settlement from one or other of the two insurers involved in their claim. Frequently we are finding that the homeowner has not used the money to reinstate the home as per the damage scope of works; rather, they have applied a quick coat of paint over the cracks and then on sold the home to an unsuspecting buyer. This is a growing problem which is only just seeing the light of day in the media now, but my crew and I have been working with this knowledge for the last five years and are acutely tuned in to detecting these homes.
In essence, RRA helps home buyers determine that the biggest asset they buy won’t turn out to be their biggest liability.
During claim time, there is often a conflict between expectation and reality. This leaves the claimant at best disappointed, or at worst angry and volatile and most definitely, not an advocate for their insurer.
We educate home buyers as to how a general domestic policy will react to the subtle and obvious issues of the home they may wish to purchase. We aim to set an appropriate expectation. But mostly, we prefer prevention rather than cure – making sure the home buyer is not buying a home with a high risk of leading to a potential claim or which will likely throw up uninsurable nasty surprises.
All aspects of our analysis of the home is based on how an insurance policy will react.
One lady comes to mind. She had only insured her home for $200,000 and it had been written off – it had fallen off its piles and fallen apart. She had no ability to salvage any part of her home and had only this paltry amount with which to start again.
Other properties were insured for small amounts like $70,000 (to cover the mortgage) but again this would have been a useless amount had the home been written off. Many people dodged a bullet in that event, simply because their houses only had minor damage.
Although there are online calculators to assist policy owners with deciding how much to insure their homes for, many people that I have spoken to simply insure their home for the amount they bought it for – forgetting that they have most often bought a second hand home. They have no concept whatsoever of the cost of building a home in New Zealand and don’t think of other factors such as remoteness from building resource supply, geotechnical considerations and regulatory costs.
I do feel that a lot more work needs to be done in this area to educate policy owners to take full responsibility and governance of their greatest asset. It is not really something that the insurance companies themselves can do, as they are cynically seen as wanting to grab more premiums from policyholders. This is something that needs to come from independent third parties.
From when we are in primary school, and right through our lives, we have been taught that New Zealand is a new country in geological terms and is busy rising and falling at an incredible rate. Despite this, for the last 70 years or so, New Zealand has been a largely quiet place in terms of disasters and so we have grown complacent.
However, for the last seven years, we have lived in a very different New Zealand and more than half the country has been affected by huge earthquakes – from East Cape in the North Island and virtually the whole of the South Island. Equally, other huge tracts of land in both the North and South Islands have been affected by storms, through rainfall, winds and storm surges.
In the latest ex tropical cyclones to hit us this summer, there were shameful images of people being evacuated at the height of the storm; mayors saying less than 24 hours before the storm hit that they would wait a few more hours for “data to firm up” before they took action.
In areas of Christchurch that are widely known to be flood prone, in the face of repeated warnings about heavy rainfall, not a single home was seen to have sandbags in place.
After the Kaikoura earthquake generated a nearby tsunami of about seven metres, the warnings given to the public, from Civil Defence, were either absent, conflicting or hours in delay. It was just plain embarrassing when we see how other countries respond to these events.
It would seem that New Zealand prefers the ambulance at the bottom of the cliff scenario to a good fence at the top. But that preference will see reinsurers withdraw from New Zealand, leaving both individuals and the government heavily exposed to financial ruin from climate change and natural disasters – the two elements we have no ability to control in any form.
My partner and I run a Flying Scholarship for a high school here in Christchurch, to assist a student per year to get on their way to becoming a commercial airline pilot. We also provide a wedding celebrant service for charity – the charity is nominated by the couple getting married.
We travel extensively throughout New Zealand and the world – this year we will visit Iceland and Greenland.
I love my home and my two cats – and also my adult triplet daughters, of course!
