Govt settles on high-level EQC reforms after five-year long review, eyes 2020 implementation
By Paul McBeth
June 26 (BusinessDesk) - The government has settled on a handful of high-level reforms to the Earthquake Commission after what's been a five-year review process, although it will still be another three years before those changes are expected to be in place.
Finance Minister Steven Joyce and Minister responsible for EQC Gerry Brownlee today announced plans to simplify the government's natural disaster insurer, although more work is needed to figure out the details and draft legislation won't be ready until later this year or early 2018. At a high level, the ministers have decided to lift the EQC cap for building cover to $150,000, clarify that EQC land cover is for natural disaster damage directly affecting an insured residence or access to it, standardise claims excess on EQC building cover at $1,000, ditch EQC's contents cover, and require EQC claimants to lodge claims with private insurers who will act as the contact point.
"The reforms we are announcing will simplify the relationship between the EQC scheme and private insurance and help provide faster and smoother resolution of claims following a major event," Brownlee said. "Requiring EQC claimants to lodge claims with their private insurer will help EQC and private insurers work better together in future."
Two years ago the government released nine proposals in a discussion document, with the preferred package including plans for private insurers to largely manage claims, building cover including site work to remove an overlap between land and building cover, doubling the cap on building cover to $200,000 while land cover would apply only where rebuilding is not possible. It also proposed lifting standard building claims excess to $2,000 and dropping EQC's contents coverage.
The review, led by the Treasury, was launched in September 2012 to consider the government's disaster contingency fund's future after its resources were exhausted by the Canterbury quakes that caused billions of dollars of damage and killed 185 people.
The government got a hurry-up on the review in 2015, putting out the discussion document five months after global reinsurers publicly grumbled that the delays were making it difficult for them to operate in an uncertain environment.