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Discussions begin on reform of EQC Act

Hon Gerry Brownlee
Minister Responsible for the Earthquake Commission
Hon Steven Joyce
Associate Minister of Finance


6 July 2015 Media Statement

Discussions begin on reform of EQC Act

Minister Responsible for the Earthquake Commission (EQC), Gerry Brownlee, and Associate Minister of Finance, Steven Joyce, say the Government has developed a number of proposals to reform the EQC Act, which are being released for public discussion today.

“These reforms are designed to ensure the EQC scheme remains focussed on insuring homes; resolves the difficulties experienced in Canterbury with the interaction of land and building cover; better integrates EQC and private insurers’ claims handling processes; and ensures the ongoing financial sustainability of the scheme,” Mr Brownlee says.

“We also propose keeping EQC’s role in supporting research and education about New Zealand’s natural hazards and how to reduce their impact.”

“This work helps build community resilience by reducing the loss and disruption caused by natural hazards,” Mr Joyce says.

“We believe the proposals in the document we are releasing today will, if implemented, better position homeowners, EQC and private insurers to plan for and recover from future natural disasters.”

The proposals in the preferred reform package are intended to work together to strongly focus EQC on insuring New Zealander’s homes, and to improve the experience for claimants. In summary the proposals are:

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EQC to exit from contents insurance: private insurers are willing to take on this business. Leaving contents insurance to private insurers will enable EQC to focus on insuring homes and will eliminate uncertainties and friction regarding EQC contents claims.

Extending EQC building cover to include more site-works and access-ways to the building: this closely reflects private insurer practice in commercial claims. It would largely remove the uncertainties and friction caused by the interaction between building and land cover by including in EQC building cover any siteworks (land works) necessary to repair or reinstate the building, and access to it.

Increasing the cap on EQC building cover from $100,000 +GST to $200,000 +GST: Increasing the cap by this quantum recognises that costs which are presently part of EQC’s land cover will become part of EQC’s new building cover. It is expected that increasing the cap will lead to lower premiums being charged to homeowners by private insurers. This will also reduce the interaction between EQC and private insurers on over-cap claims by about two-thirds. Over-cap claims have been a major point of friction and uncertainty for claimants in Canterbury.

Limiting land cover to situations where rebuilding is not practicable: this will ensure that homeowners continue to receive insurance for the land if their home cannot be rebuilt on its original site and they are forced to buy another home elsewhere. EQC would no longer provide cover for land damage that has not caused damage to the house itself, for example undulations to land around the house.

Requiring claimants to lodge their EQC claim with their private insurer: this will reduce uncertainty for claimants and is expected to improve their claims experience. Insurers will need to validate the claimant’s status before forwarding the claim to EQC, thus reducing the current information churn between the claimant, EQC and insurers. If this claims lodgement proposal works as intended, and agreements are reached between EQC and insurers, insurers will over time take an even greater role in the claims management process.

Technical improvements in drafting core elements of the legislation: this should improve the experience for claimants by increasing clarity about what the EQC scheme covers.

The review is forward looking and will not have any impact on the handling or outcome of existing EQC claims. Mr Brownlee says the Government welcomes public submissions on the proposals.

“Ministers will carefully consider submissions before making decisions on a reform package. That package will then form part of a Bill which we expect to introduce to Parliament in early 2016.”

Submissions can be made using the submission template available at:www.treasury.govt.nz/publications/reviews-consultation/eqc. Submitters can open and save their own copy of that template, make submissions on any of the proposals they wish, and email it to submissions.eqcreview@treasury.govt.nz

The deadline for submissions is 5:00pm on Friday 11 September 2015.

ends

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