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Friday, December 7, 2012

Gerry Brownlee and being stuck in the Red Zone

Yesterday’s Press carried an article Red-zoners call for more time by Charlie Gates (here). The basis of the article is that, for some people, circumstances totally beyond their control mean they cannot be out of their Red Zone properties by the 30th of April.

Part of the article refers to Minister Brownlee’s view of the situation:

Earthquake Recovery Minister Gerry Brownlee told Parliament yesterday that it was "unlikely" that red-zone residents would be able to stay in their homes after the deadline had lapsed.

"Given that to do that there would have to be maintenance of access and also infrastructure to those homes, it would need to be assessed on a case-by-case basis but I would have to say it is unlikely," he said.           [note: can’t find this in Hansard so taking the Press on trust]

The impression given, and erroneously recorded for posterity in Hansard,  is that because of the need to maintain access and infrastructure to the homes of those who need an extension, it would be unlikely they would receive an extension. The point missed by this statement is that not all those seeking an extension have problems with access or infrastructure. Unless the address and infrastructure details of those asking for the extension were known, and had been investigated, how could such a statement be made? Is it intended to make a case by case assessment? If so is there a list of those needing extensions? When, how and by whom is it being compiled? Not exactly a meaningful statement.

Or is there a quite different meaning? Is it just simply that it is unlikely that an effort will be made to do a case by case assessment? Why not? Too much like hard work? The people and their circumstances don’t warrant the effort? Or maybe there will be loss of face or the creation of some horrific precedent or squatter problem if a small concession is made, no matter how important it is to those who very much need it?

While Red Zone damage is, by definition, wide spread, there are locations where the infrastructure continues to function with little or no extra maintenance. Cowlishaw Street and Chaddesden Lane immediately spring to  mind (and of course the residents still pay full rates because the council is still providing full services).

Why would Minister Brownlee make such an sweeping, and not entirely accurate, statement to Parliament?  Assuming it wasn’t just an attempt to shut down criticism and moaning by creating the impression that nothing can reasonably be done, why say this?

It may well be that Minister Brownlee is not well informed of the situation, and can speak only on the basis of the briefings he has received.  No doubt Minister Brownlee would rather endure Vogon poetry than speak with Labour or New Zealand First MPs, but surely he has spoken with his caucus colleagues from Christchurch Central and Waimakariri? I would like to think they have passed on the messages given to them that there are people stuck and they need an extension of time. Or is he deaf to his Parliamentary colleagues?

Perhaps if the Minister’s more able advisers were to talk with those who are stuck in the Red Zones, and relay the information accurately and fully to the Minister, he would be better able to understand what the problems are, how people are suffering, what is needed to be done, and keep Parliament more accurately briefed on the situation. Not to mention make some effort to assess the case by case needs of those stuck in Red Zoned houses.

As an aside, I hope Ministers get better information than was supplied to the Press for this article.   At the foot of the article there are some pretty much meaningless statistics from CERA. Take the following:

The 97 properties red-zoned after appeal in August were given eight months to settle. Of those, 14 have already settled and moved out and 34 have signed a sale and purchase agreement, according to Cera.

What do the numbers mean? Nothing of relevance or use. They may create the impression that perhaps 48 properties out of 97 have found successful resolution but that is unlikely to be close to reality.  More significantly, of the 97 properties how many have certainty that they will be gone by the 30th of April? That is the important number, and it isn’t there.  Is this the level of information being passed to the Minister and/or his advisers?

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AA Insurance changes – important for everyone with house insurance

Stuff (here) has reported that AA Insurance will no longer provide a full replacement policy option – instead they will offer only a “sum assured” policy. Existing policy holders will automatically switch to the sum assured style of policy on the 1st of July next year (if you are an AA customer there is more info at the bottom of this blog entry).

The change to a fixed-sum policy can be expected to occur across all companies as it is becoming a requirement of re-insurers, who do not like having to cover a risk of unknown size.

AA Insurance have a media release here. The release puts a positive spin on the change, claiming faster resolution and greater certainty for policy holders. While this may be true in part, it is clear there will be crucial areas of uncertainty, and the end result will inevitably remain the same – claimants at risk of being denied what they were insured for.

As discussed in the Stuff article, establishing the rebuild value of a property will be difficult and there will be uncertainty how to adjust it over time.  AA Insurance put it this way:
With a Sum Insured policy the customer will be in control of establishing the value of their home and keeping it up-to-date, should they make any improvements or extensions.
Fine, but how is this to be done? AA suggest the use of on-line cost calculators (they will have one), or getting a valuation from a quantity surveyor, valuer or builder. I am sure insurers will be happy to accept these figures for the purposes of setting premiums, however will they also be accepted at face value when a claim is made? Will AA, and others, seek to review the valuation in the event of serious damage or total loss? If so, which recent history has shown to be inevitable, how will this be done and on what basis? AA have made no mention of this.

When things go wrong what will you get? This is not yet clear but the AA media statement says: “The rebuild value is known as ‘Sum Insured’, and is the cost to rebuild a home to the same size with similar materials at today’s rates.” Is it safe to assume that this includes to the same design? AA’s latest policy document (online here) is not clear about this. There is no indication whether a new policy document will be released on the 16th when the changes come into effect. What follows is based on the current policy document (which is undated).

Even if the same design is included in the insurance policy, there is one snake-oil aspect already evident in the detail of the policy announcement.
The snake-oil starts with:
By moving from square metres to Sum Insured, our customers will know upfront the most their insurer will spend to rebuild their home, in the event it does need to be rebuilt. They will also know they are paying the right price to insure their property, and that the specifics of their home have been taken into account.
Is it really both the right price and the right amount of insurance pay-out?  At the moment the answer seems to be no. No, because reading the latest AA policy document (online here) there is no definition of Sum Insured but there is a definition of Reinstatement value expressed as:
Reinstatement ValueThe costs to repair or to rebuild the home to a condition as similar as possible to when it was new or last enhanced, using common materials and methods, to a specification, size and standard comparable to the condition of the home immediately before the accidental damage occured, less any discount available to us
To begin with a few points of detail arise. What is meant by “similar as possible”, “common materials”,  “(common) methods”, and “comparable to the condition... immediately before…”? Does this mean substituting pine for rimu panelling, particle board for kauri flooring? With the new policy, if you paid for rimu and kauri, and whatever else, should you not expect that it will be supplied, especially as media statement says “the specifics… have been taken into account”?

The current policy has a limited number of definitions, and critical terms and expressions are undefined.  Such expressions need to be defined in the policy, as the Canterbury earthquakes have shown them to be at the heart of both confusion and conflict. Hopefully AA will be releasing a rewritten and better defined insurance policy when the changes come into effect on the 16th of this month.

A more important criticism relates to the last part of the definition where the Reinstatement value is adjusted downwards to reflect the amount of discount the insurer would expect to get (“less any discount available to us”).  If the insured is obliged to provide an accurate valuation which, as the media release states, becomes “the most their insurer will spend to rebuild their home”, will AA then apply a discount via a policy definition? Does this mean that the insured pays a premium for a sum the insurer has no intention of making available (a compulsory profit margin)? Unless changed this would seem to be a matter for the Commerce Commission to consider.

For AA customers from the AA media release:
What do customers need to do?If customers are taking out a new policy with AA Insurance, they’ll need to provide an up-to-date estimate of their home’s rebuild value. There are some simple ways to do this. One way is to use an online building calculator such as those that have been in use for many years overseas and are now available in New Zealand. These calculators enable details of the home to be entered before providing a general estimate of the rebuild cost to work from. Another way is for customers to provide their own valuation by their quantity surveyor, valuer or builder.
However if they’re an existing AA Insurance home insurance customer, from 1 July 2013 they’ll need to check their renewal policy to approve the Sum Insured figure. An estimated Sum Insured figure will be automatically generated based on the existing policy for the customer to review, and will be adjusted each year to include inflation and general increases in rebuilding costs.
If their policy was renewed before 1 July 2013, customers can either wait until the following year for renewal, or change their policy over to the new Sum Insured at their discretion.

Thursday, December 6, 2012

Info updates: CERA and Southern Response

CERA have released the December issue (N0. 16) of the Greater Christchurch Recovery Update. You can download a copy from here. Issues covered include:

  • 2012 – The recovery, Canterbury-style
  • Have your say on transport planning for the central city
  • A brief summary of An Accessible City, the draft Transport Plan
  • Security and safety in the residential red zone over the holidays
  • Support services over the Christmas and New Year period
  • SCIRT’s first full year as the infrastructure rebuild team
  • Land acquisition
  • What EQC is doing to settle land claims
  • Global opportunity to find solutions for Christchurch
  • New resource to assist Cantabrians with financial issues
  • and updates from Environment Canterbury, Christchurch City Council, Selwyn District Council, and Waimakariri District Council

Southern Response have released their first annual report.  A copy can be downloaded from here.

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Wednesday, December 5, 2012

EQC–update to changes to the Apportionment FAQ

Monday’s blog (here) mentioned changes to how EQC would make it’s apportionment assessment, and that reference to the customer's apportionment estimate had been removed.

Yesterday EQC changed the page again, reinstating that part of the text to the way it was prior to Monday. The two paragraphs (here) now read:

  • If there is no EQC assessment for every claim, then EQC looks at evidence such as the customer's apportionment estimate and the pattern of damage at similar neighbouring properties.
  • If damage from any of the three events had exceeded the customer's cap (usually $100,000 +GST), the repair of the home would be managed by the private insurer.

Further evidence that EQC don’t know what they are doing, and the on-going absence of workable quality control?

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Tuesday, December 4, 2012

Hard bargaining end games

A few weeks ago there was a post on more of the tactics used by hard bargainers (here).

Auckland barrister and professional mediator Nigel Dunlop has written the fifth and final article in his series describing hard bargaining tactics. This article describes the games used to put pressure on negotiations to force an unfavourable decision on someone as negotiations seem to be coming to an end.

The final instalment is on the NZLawyer online website here.

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Monday, December 3, 2012

EQC - changes to the Apportionment FAQ

EQC today changed some of the layout of its Apportionment FAQ and added more text (here).

Perhaps the most significant change occurs at the end of the explanation of how apportionment works, with the removal of the paragraph (underlining added):

If there is no EQC assessment for every claim, then EQC looks at evidence such as the customer's apportionment estimate and the pattern of damage at similar neighbouring properties.

and replacing it with:

If the damage to your home wasn’t assessed after each event, EQC needs to use a variety of methods to establish how damage should be apportioned. These include comparing the damage with other properties in the area where we know what damage occurred and when it occurred. It also includes information provided by the homeowner.

Presumably the “customer’s apportionment estimate” contained in the old version was too inconvenient for EQC to live with, and so it had to be replaced by something that gave them more more wriggle-room.

One wonders under what authority EQC can keep changing the “rules”, whether they intend to make them retrospective, and how such changes ensures consistency of treatment throughout the assessment programme.

NOTE: some of the changes were reversed on the 4th of December – see here.