Government takes over AMI earthquake claims

Media release – 5 April 2012

Government takes over AMI earthquake claims

The Government has taken ownership of the entity responsible for settling claims by AMI policyholders for earthquake damage incurred prior to today. This follows Reserve Bank approval for the purchase by IAG of a new company, to which all existing AMI earthquake business and CLIC car insurance has been transferred, and which will trade under the AMI name and brand.

AMI’s earthquake claims division is now Southern Response Earthquake Services Limited, trading as Southern Response in its new red and black Canterbury branding. The government-owned company is located in Christchurch where the majority of its around 160 staff are based. Southern Response has been established with significant resources, and is backed by the Crown Support Deed, so that earthquake claims payments can be settled in accordance with policy terms.

AMI has already paid out around $300 million in settlements for earthquake damage claims. Over the next five years, it’s estimated Southern Response will settle a further $1.5 billion.

Despite the separation of AMI into two companies, AMI policyholders are insured with the new AMI and will also be customers of Southern Response only if they have claims for earthquake damage occurring prior to today’s sale.

Should an earthquake or other catastrophe occur after today, claims for any damage from these events become the responsibility of AMI Insurance, not Southern Response.

As at 5 April, Southern Response is responsible for settling earthquake claims involving:

• more than 11,000 claims to 6670 Canterbury properties where damage exceeds EQC’s $100,000 plus GST ‘cap’

• nearly 22,000 ‘out of scope’ claims, for damage to paths, driveways and other external structures which are not covered by EQC

• over 3000 temporary accommodation claims which are not covered by EQC

• around 1500 other claims including contents, loss of rent and motor vehicle.

AMI policyholders with an ‘over cap’ house claim are entitled to choose either a cash settlement to buy another home or to have their homes repaired or rebuilt in accordance with their AMI Insurance policies. Current estimates indicate this work will involve Southern Response being responsible for the rebuild or repair of over 6500 homes.

The Government has appointed Nelson-based company director Ross Butler to chair Southern Response. Mr Butler has a background in financial services and insurance related companies. He is currently chairman of Nelson Marlborough Institute of Technology, Mercer Investment Nominees, and The Code Committee, Financial Advisers Act.

“Southern Response’s role is to settle the earthquake claims of AMI policyholders for events up to today and make sure they get what they are entitled to under their AMI insurance policy,” said Mr Butler.

“While this sounds simple, it’s going to take a while as we work through the complex issues associated with this series of earthquake events. These include the need to work through apportionment issues with EQC, uncertainty in relation to land zoning, and need to address damage to land in the TC3 zoning.

“We're going to take a collaborative approach to working with the other government agencies and insurers so our customers can get on with their lives, and rebuild their city and region as quickly as possible.”

Following an externally managed global recruitment process, the Southern Response Board has appointed Peter Rose as CEO. Mr Rose has been leading AMI’s earthquake claims team since May, 2011.

Mr Rose says much effort has been expended over recent months of planning to ensure AMI policyholders experience a seamless service in the transfer of their earthquake claims responsibilities to Southern Response.

“Customers with an AMI earthquake claim will notice very little difference and don’t have to do anything differently in their claim dealings.

“Southern Response is staffed by the same team of around 160 people who’ve been managing earthquake claims by AMI policyholders since September 2010. So it’s the same people, with the same direct dial phone numbers, using the same processes – all that’s changed is the name, there’s a new 0800 number (0800 501 525) and the company they work for is now government-owned.”

When the last claim is closed, so will Southern Response.

#ENDS

SOUTHERN RESPONSE BOARD:

Ross Butler (chair), Anne Urlwin (deputy chair), Jenn Bestwick, Bevan Killick, Susan Thodey, David Whyte.

WHAT CONSTITUTES AN ‘AMI EARTHQUAKE CLAIM’?

The majority of AMI policyholders in Canterbury only have a claim for earthquake damage with EQC. However more than 20,000 also have an earthquake claim with AMI because their claims:

• are ‘over (the EQC) cap’ of $100,000 plus GST for damage to their home or $20,000+GST in contents for an earthquake event.

• are ‘out of (EQC’s) scope’ – because the damage has occurred to parts of their property such as driveways, fences and paving, or contents items such as artwork and jewellery (which, under their AMI policy are not covered by EQC but are covered by AMI).

• involve temporary accommodation or loss of rent claims (which EQC does not cover).

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