Claim payouts continue to slow
11 Jun 2017
The property insurance claims coming in from the Canterbury earthquakes are piling up, as the payment rate for claims has “continued to slow,” according to a Reserve Bank of New Zealand (RBNZ) report.
In November 2016, RBNZ estimated that private insurers and the Earthquake Commission (EQC) had yet to pay around $3 billion to $6 billion in claims stemming from damage caused by the 2010 and 2011 Canterbury earthquakes.
As of May 2017, the RBNZ Financial Stability Report said that $1.6 billion has since been paid out, but there is still around $3 billion to $7 billion left to pay, meaning that insurers have been falling behind in paying out claims.
“The remaining claims are generally the most complex and, in many cases, are in dispute or litigation,” the report said. RBNZ is constantly updating its insurance payout estimates as more claims come to light and insurers re-estimate existing claims.
As of end-March 2017, the EQC and private insurers had paid out a total of $33 billion.
Megan Woods, Labour’s spokeswoman on Canterbury, criticised the pace of payouts, saying that the situation was at a virtual standstill.
“The outstanding claims, I mean $3 billion to $7 billion, it looks like a small number just because of the other big numbers around it, but that’s a significant amount of money,” she told Fairfax Media.
Woods attributed the rising costs to the EQC, as it declared claims over its $100,000 threshold, and passed them to private insurers at a late stage.
“The insurers are only able to deal with over cap claims when they actually hit their desks,” she continued.
Also, the longer it takes for repairs to finish, the higher the costs due to inflation.
“The cost of repairing a house or rebuilding a house in 2017 is significantly more than it was in 2011 or 2012. There’s also the six years of inflation or building inflation, which has been running quite high,” Woods said.
- Insurance Business