Earthquake cover exposes ‘trauma’ of homeowners
A new insurance policy designed to give rapid cash payments after a serious earthquake also reveals how risky insurance market Lloyd’s of London views New Zealand cities to be.
The policies from insurance start-up Bounce were not designed to replace earthquake cover on house insurance, founder Paul Barton said.
Instead, they were there to help Kiwis bounce back quickly by putting money in their accounts for immediate post-earthquakes expenses, including to buy food or replace broken items, if their incomes were disrupted.
‘‘New Zealand’s lived experience serves as a reminder of the physical, emotional, and financial stress faced by those dealing with the aftermath of a major earthquake,’’ said Barton, who saw the impact on homeowners of the Canterbury earthquakes a decade ago while working for the Medical Assurance Society.
‘‘It has also shown how complex and time-consuming it can be to make, process, approve, and pay traditional insurance claims.’’
Since the switch to ‘‘sum insured’’ house insurance after the Canterbury earthquakes, payments to homeowners for earthquake damage have become much faster, as homeowners found after the 2016 Kaiko¯ ura earthquake.
But Barton said: ‘‘A number of costs are incurred in the time between an earthquake occurring and a household or business receiving an insurance payout, and this delay can exacerbate that stress and cause significant financial hardship.’’
He likened that to trauma insurance policies, which people often took out with income protection policies, and which were designed to make rapid lump-sum payments to help sick, ill and injured people cope, while waiting for their income protection policies to kick in.
Bounce’s policies are underwritten by Lloyds of London, which now ranks
New Zealand as the second most disaster-prone country in the world, behind Bangladesh. The policy premiums are calculated based on the risk the London insurer sees of major earthquakes happening in the areas in which people live.
People from the well-to-do Auckland suburb of Epsom would pay $9.20 a month for $10,000 of cover, the same as someone living in the Dunedin suburb of Kaikorai.
The same amount of cover for a person living on Rawhiti Terrace in Kelburn in Wellington was $20.70. A person in Newall Avenue in the suburb of Fendalton in Christchurch would pay $13.80.