Shake-up of earthquake cover needed

A decade since the Canterbury earthquakes, an overhaul of natural disaster cover is overdue.

20oct shake up of eqc hero

September 2020 marked a decade since the Canterbury earthquakes wreaked havoc on the region.

As the 10-year anniversary rolled around, the government released its response to the recommendations of the Public Inquiry into the Earthquake Commission (EQC), led by Dame Silvia Cartwright.

Dame Silvia’s report, made public in April, painted a damning picture of EQC and its handling of the 470,000 claims that resulted from the quakes.

It found the commission was poorly prepared to cope with the events of 2010 and its processes for dealing with claims “fell well short of what was fairly expected of it by claimants and others”.

“Many mistakes”

EQC’s shortfalls had major impacts on consumers, some of whom are still waiting for their homes to be repaired.

The commission’s lack of expertise in dealing with repairs led to “many mistakes”, including inadequate quality control and uncoordinated planning. Poorly thought through decisions were “frequently reversed”, adding to confusion for EQC staff and claimants.

“There is broad scepticism among claimants and the wider public about what became known as ‘botched repairs’ … EQC has been unable to reassure homeowners that the repairs, over which those homeowners had little control, were done to a satisfactory standard,” Dame Silvia said.

In some cases, homeowners who had relied on EQC’s damage assessments later discovered they weren’t adequate and ran into problems getting their homes repaired.

“Cosmetic” repairs

There were also cases where repairs were purely “cosmetic”, with properties left in a worse state and later sold to “unsuspecting purchasers or rented to vulnerable tenants”.

Failure to repair stormwater and sewage drains at some of these properties also means problems will continue for years.

“Realistically, EQC will not be able to close its cohort of Canterbury claims for some years, as long as drainage claims continue to be made,” Dame Silvia said.

Adding salt to the wound, EQC’s processes for dealing with disputes made the situation worse for many claimants. Its responsiveness to concerns was “slow and inept”, and it took too long to realise many disputes could have been resolved with better communication, and use of mediation and arbitration.

These failures “cost EQC dearly – financially as well as in terms of its reputation”.

Fixing EQC

The inquiry made 70 recommendations, including overhauling the Earthquake Commission Act and increasing the EQC cap for residential building cover. This cap is currently $150,000, well short of the rebuild costs for an average house.

It also recommended setting up a dispute resolution scheme that claimants having problems with EQC could use. Access to legal advice for claimants was also deemed “fundamental”, with a recommendation for a free or low-cost community law service to assist consumers in dispute with the commission.

A review of the act, led by Treasury, is in the pipeline with legislation expected to be introduced in mid-2021. The review will also consider the cap on residential cover.

We think an increase in the cap is long overdue. Some progress has been made on providing dispute resolution services, establishing the Greater Christchurch Claims Resolution Service and the Canterbury Earthquakes Insurance Tribunal.

Forty-five of the inquiry’s 70 recommendations are the EQC’s responsibility to implement. They include making improvements to claims processes and staff training. It will get independent auditors in to assess whether the recommendations have been put in place.

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