February 23, 2015 3:00pm by David Farrar

Herald on EQC

The four years since the Christchurch earthquake is more than enough time for a discussion about New Zealand’s system of disaster insurance. The system might charitably be called a public-private partnership – the state’s Earthquake Commission pays up to $100,000 for damage caused by natural disasters, private insurance covers costs above that sum. But as many insured households in Christchurch discovered, it’s not much of a partnership in practice.

They had to make separate claims to the commission (EQC) and their private insurance company and the response was not always harmonious. Many heard from one agency that their house needed replacement and from the other that it could be repaired. Until they could get the public and private insurers to agree, nothing could be done. Since the EQC paid out readily on claims under $100,000, the least serious damage in Christchurch tended to be repaired reasonably quickly while households needing more extensive work suffered confusion and frustration.

The status quo is not satisfactory. I believe the best way forward would be to have EQC being a reinsurer to the frontline companies, supporting them in the case of a major disaster.

Private insurers such as Vero want to retain dual claims management yet none of them want to cover hazards on the scale of earthquakes and floods. But the company believes customers would be better served, or at least less confused, if their private insurer dealt with the EQC on their behalf. That would be more in tune with the way customers are charged as the disaster fund comes from a levy on private household insurance.

Few private insurers could handle a major earthquake without the state through EQC involved. However that doesn’t mean that EQC should deal directly with customers.