More difficult for claimants
Recently, the Government has backed a partnership model for resolving natural disaster claims. Private insurers will manage claims even if they are under the statutory cap of $150,000, either as agent for EQC or as part of their own commercial operations. The model is based on the experiment implemented (with mixed results) for Kaiko¯ura earthquake claims in 2016.
At the time, I asked a number of questions which were largely unanswered by the Insurance Council and remain valid today. Let’s revisit them:
Uncertainty over processes. There is no single standard for claims management in New Zealand. The eight private insurers will all have different resources, approaches and commercial objectives. While the Fair Insurance Code requires insurers to explain the steps which will be taken along the way, the code’s provisions lack specificity and courts seem reluctant to enforce them against insurers.
Engagement. The lack of community engagement in developing the model is deafening, demonstrating a failure to take a customer-centric approach. The claim by the Insurance Council that these processes will deliver ‘‘simplicity and certainty for homeowners’’ is inconsistent with the experience of many Kaiko¯ura earthquake claimants.
The insurer’s utmost duty of good faith. The largest award of damages for a breach of the duty of good faith was $5000 against Tower Insurance. There is barely any incentive for insurers to act in good faith and there does not appear to be any agency capable of monitoring compliance with this duty.
The Fair Insurance Code. The Code sets out minimum standards and has been used as a basis for assessing awards of general damages for earthquake claims but only comes into play where a claimant can prove an insurer has underestimated the scope of damage and the amount of the claim.
Ombudsman. Currently, claimants can make a complaint to the Ombudsman if EQC has failed to provide relevant information or to follow a fair process. The Ombudsman has no jurisdiction over private insurers so the new model has the effect of preventing claimants from complaining to the Ombudsman.
Natural justice. Currently, EQC is required by the Bill of Rights Act to observe the principles
of natural justice and ensure customers have access to justice. Under the new model, both EQC and private insurers avoid the constitutional protections provided by these provisions.
Access to justice. The new model will severely limit this. There is no provision for complaints being processed within a particular timeframe, no mandatory requirement for mediation and no dedicated low-cost tribunal for unresolved claims. The only way of challenging claim outcomes will be through the courts and the onus will be on claimants, many of whom will lack resources to pay lawyers and experts.
Human rights. Access to justice is a fundamental human right, as are health and housing. Private insurers are currently under no legal obligation to adopt a human rights approach. Their obligation is to their shareholders; eg this year IAG paid a dividend of 10 cents per share to its shareholders after posting a profit of more than $800 million. EQC has a responsibility to protect human rights but, under the new model, without proper justification, has abdicated its responsibility.
Litigation. The only option for homeowners seeking to challenge insurance claims will be litigation. Insurers generally engage top-tier law firms and provide training to their experts, eg Southern Response’s technical resolution workshops. Combining the resources of EQC and private insurers has the effect of making claimants more marginalised and vulnerable… the lesson from Canterbury and Kaiko¯ura is there is no safety net or independent assistance for vulnerable claimants.
It’s difficult to see the new model as anything other than an arrangement which will work to the advantage of private insurers and make it more difficult for ordinary New Zealanders to recover from the effects of natural disasters. For many claimants still struggling with Canterbury earthquake claims, I expect this latest announcement will be a bitter pill to swallow.