Difficult claims prompt Southern Response delay
INSURANCE claims management firm Southern Response has delayed its key target date to have nearly all of of its work complete by six months.
The new target is to complete 90 per cent of ‘‘current claims’’ by the middle of 2017, rather than by December 2016.
At the state-owned company’s annual meeting in Christchurch yesterday, chairman Ross Butler said Southern Response had been held up by difficult claims, particularly involving repair or rebuilding of buildings with multiple apartments or units.
In most cases those units were covered by different insurers and in some cases units were not insured. However, the shared property construction was gaining momentum.
Southern Response was about per cent through its work.
Butler said the remaining 10 per cent of work, to be finished from mid 2017, was likely to include many of the claims that had gone through a court process. That legal work took time, he said. GCA Lawyers, headed by Grant Cameron, earlier this year filed an action against Southern Response in the High Court.
Butler referred to the legal action when talking about the last 10 per cent of work that would need to be done.
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‘‘The list [of court work] is years long. If cases go through the High Court at the speed they are at the moment, we’re potentially talking eight to 10 years,’’ Butler said.
Southern Response’s dispute rate in the High Court earthquake list was on a par with the insurer’s market share at the time of the 2010 and 2011 Canterbury earthquakes.
Butler said the new mid-2017 target date was provisional.
It assumed there would be no new issues such as the Earthquake Commission’s additional guidelines on liquefaction, he said.
‘‘As we talk there are new things happening so we just have to make certain we are keeping up to speed with those.’’
One claimant at the meeting, who did not want to be named, said delays on repairing his driveway and paths had been far too long.
Another, Ali Wilkinson, commended the politeness and professionalism of Southern Response staff, but said that it had taken up to six months to receive a response from the company.
‘‘I do have a bit of a concern that sometimes the squeaky wheel gets the oil.’’
In the year to the end of September, Southern Response had completed 1338 rebuilds or repairs and its customers had managed their own rebuilds in 453 cases.
Separately there were another 513 rebuilds or repairs ‘‘under construction’’ and 849 at the design and documentation stage.
Nearly 1600 claimants had bought another house, with 1058 taking a cash settlement and 437 managing their own rebuilds. Work with other claimants was ongoing.
Just over half of over cap claimants had opted to cash settle, the company said.
The Government has promised to back all of Southern Response’s earthquake claims even if the company needs more than the $1 billion of Government support already pledged.
Butler said the $1b was split into two tranches of $500m with the company already eating into the first $500m.
‘‘We began quarterly drawdowns of the Crown funds at the start of October 2015, with a drawdown of $40 million.’’
Butler said that 50,000 claims had been notified to Southern Response, including the ‘‘over cap’’ claims.
The Government’s Earthquake Commission is in charge of completing repairs under $100,000, while the insurers like Southern Response are responsible for the more expensive and complex task of repairing claims over $100,000.
The 50,000 also included contents, accommodation, business interruption and out of scope claims. Out of scope related to things like paths, Butler said.
An actuarial estimate of total costs, including claims handling expenses but net of any Earthquake Commission contributions, had risen from $1.82b at June 30, 2011 to $2.72b at June 30.
Chief executive Peter Rose said there was a continued notification of new ‘‘over cap’’ claims.