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Wednesday, October 21, 2015

Survey of former residential red zone owners who accepted Crown offers

CERA is currently surveying all who were Red Zoned and accepted the  Government’s (Crown)  offer.  Research company Neilsen are conducting the survey and invitations to take part started going out via e-mail on the 14th (last week).

If you were Red Zoned, and took the offer, you should have received a survey invitation by now. If not it is likely to be the result of a change of e-mail address since the Crown offer process started. Whatever the reason, you can participate by ringing Neilsen on  0800 400 402.

If you are cautious about taking part in case it resurrects stresses and demons best left buried, Neilsen offer the following advice in the first part of the survey:

We hope that you will find the survey experience positive, but we understand that many former property owners may find the issues it covers difficult and taking part may bring back mixed emotions. If you find this to be the case we encourage you to consider calling the Canterbury Support Line on 0800 777 846 or to contact a trusted friend. You are free to stop the survey at any time.

Should your caution be motivated by cynicism or mistrust you won’t be alone. Never the less give thought to at least looking at the survey. If you don’t have your say, your views won’t be in the mix.

The survey is structured in an unusual way that may, or may not, fully and accurately capture the issues and experiences of Red Zoners. There are two parts for some participants to fill in, and one for others. Each part has a wide range of questions.  It may be you will find the questions don’t address issues that were, or still are, important. This can be saved up for the final part of the survey where there is (at least in the draft I have seen courtesy of Neilsen and CERA) an open-ended question:

Finally, please add any comments or suggestions you would like to make, particularly any suggestions about what more could be done to help people in the future if their properties are in the worst affected areas following a natural disaster.

Take the opportunity to say what you have to say, there may never be another chance. Were there stresses that the survey overlooks  (e.g. being in the limbo of an Orange zoning, having to relocate while the Ministry of Education was restructuring schools)? Were there services that just weren’t up to it and so you didn’t use them  (e.g. a medical centre or other health service you thought incapable or unwilling to give the help needed?)  Anything else? Mention it now; include the things that worked, as knowing what worked is as important as knowing what failed. 

Unfortunately for some, the survey is designed to be completed on-line (another example of not acknowledging the electronic world is inaccessible or alien to many?). Even those with computers and the skills to use them may have difficulties – many of us were brought up as part of a paper based and reflective culture where time was available and drafts were used to ensure we said as clearly as we could exactly what we meant. If you know anyone who would struggle to do this perhaps you could help them, or maybe ring Neilsen and see what support they can offer. The Human Rights Commission and others may have something to contribute here.

The following is CERA’s release intended for those who haven’t been contacted about the survey:

CERA is conducting a voluntary, confidential online survey of former residential red zone property owners who accepted Crown offers for purchase of their properties. The survey is intended to help the Government, local authorities and communities in responding to any similar situations that might come up in the future.

CERA has contacted former property owners (or people who acted on their behalf) directly, but some people's contact details have changed in the past couple of years. If you're a former residential red zone property owner who accepted a Crown offer for purchase of your property and haven't received your invitation to participate, please contact Nielsen, the independent research company carrying out the survey on CERA's behalf: 0800 400 402.

Monday, October 5, 2015

THX 4 THE MEMORIES - Avonside photographic exhibition now online.

The 22nd of August 2013 was the official opening of the Avonside photography project Thx 4 the Memories exhibited along Worcester Street.

It consisted of photographs of Avonside people by Bridgit Anderson and Tim Veling along with snippets of their Red Zone experiences as recorded by Glen Busch (original post here).

Tim has put together an online book that recreates the exhibition and you can find it by clicking on the first link below. Eventually, once numerous obstacles are overcome, there will be a print version available.

Tim has a dedication and endurance second to none and continues to record what is happening where we once lived and how it will all eventually turn out. Tim has done other projects as well and the second link takes you to the projects part of his website.

Thx 4 the Memories

http://www.timjveling.com/thx-4-the-memories
then click on the book cover just below the video.

All Tim's projects

http://www.timjveling.com/galleries

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Wednesday, May 6, 2015

More support for legislative changes covering insurance non-disclosure

The Insurance Business New Zealand website reprorts that dispute resolution service Financial Services Complaints Ltd (FSCL) supports the Insurance and Savings Ombudsman’s view legislation is needed to deal with non-disclosure and insurance claims. The article is here.

The following are extracts from the article:

“We are a step behind overseas jurisdictions like Australia and the UK.

“I think the government should be taking a closer look because the current law is very old. There have been, I think, two Law Commission reports saying it’s time for the law to be looked at.”

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Residential Red Zone offer feedback sought

CERA is seeking feedback on their Preliminary Draft Residential Red Zone Offer Recovery Plan. Comments must be submitted by 5.00pm on the 19th of May.

The Draft plan starts off by explaining the “why?”.

The purpose of developing the ‘Residential Red Zone Offer Recovery Plan’ is to assist the Crown (through the Chief Executive of the Canterbury Earthquake Recovery Authority (“CERA”)) to determine whether it should make new offers to buy vacant, commercial and uninsured properties in the residential red zone and, if so, how such offers should be structured.

However, before the plan there has to be a draft plan.

This is the Preliminary Draft Recovery Plan, notified for public consultation on 5 May 2015. This Preliminary Draft is the first opportunity for everyone to provide their views. You do not have to be an affected property owner or live in greater Christchurch to have a say. This public consultation is an important first step. The Preliminary Draft is in essence a discussion document, which sets out the key contextual information and developments. It focuses on the key questions the Crown will need to consider about the vacant, commercial and uninsured red zone properties, and it asks for your views. It does not predetermine what any final Crown offer will
be.

A copy of the draft plan is available here and you can make an online submission part way down the page here.

There are two pages of information designed to explain what is happening and why. Click on the page name shown in red to go to that page.

  1. Public to have say on red zone offers – background to the court case over payments to some living in the Red Zones, the court ruling, how this process is designed to ensure all who are affected (directly or indirectly) and how to have your say.
  2. Questions and Answers – a series of questions, with supporting answers, to help clarify what is going on. The questions are:
    • What was the decision made by the Supreme Court?
    • What is a ‘Recovery Plan’?
    • What is the Residential Red Zone Offer
    • Recovery Plan – Preliminary Draft?
    • Why do you need me to comment?
    • Will this Recovery Plan decide what the offer will be?
    • What happens next?

The Cabinet Paper setting up this exercise is here.

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Thursday, April 30, 2015

Legal class action against Southern Response?

Wednesday’s Press has an article Southern Response class action ‘no win, no fee’ here.

The proposal, offered by law firm GCA lawyers, is for “disgruntled customers of a major earthquake claims-holder to join "no win, no fee"class action lawsuit.”

Sounds too good to be true (and potentially is). Click on the link to continue.

Tuesday, April 28, 2015

Insurance Ombudsman wants insurance legislation to cover non-disclosure of information

The Insurance Business New Zealand website is reporting that the Insurance and Savings Ombudsman Karen Stevens supports legislation to better protect customers relating to information they disclose to an insurer. The following are extracts from the article (the full article is here).

Karen Stevens says legislation would mean an insurer could only avoid a policy where it could show the non-disclosure was deliberate.

Some cases are clear, where people deliberately leave out information they were asked to provide, knowing that it will go against them. However, in other cases, people accidentally leave out information because they have forgotten, or do not realise it is important.”

The current law requires a consumer to disclose to an insurer all information a ‘prudent underwriter’ would consider important. But, said Stevens: “This is extremely difficult for consumers to understand.

“My concern is that consumers don’t understand the consequences of not providing the information.

However, she said: “Industry self-regulation is not enough on its own. We need to review the law and make changes to stop consumers getting themselves into a situation where they are uninsured and, in many cases, uninsurable in the future.”

Later in the article the views of Insurance Council of New Zealand CEO Tim Grafton are aired. These include the following:

"Tim Grafton, CEO of the Insurance Council of New Zealand, maintained the New Zealand was, in fact, one step ahead on the subject.

So, we have no problem about addressing this issue - indeed we are ahead of the curve.  What is important here is insurers' approach and the new Code addresses the issue.”

Tim Grafton's comments are not, in my view, an accurate reflection of the situation.

As mentioned in some detail on this blog (17th of March here) the Fair Insurance Code does not come close to the lead set elsewhere, especially the U.K., with regards to information disclosure. New Zealand legislation based upon the U.K.'s Consumer Insurance (Disclosure and Representations) Act 2012 is where we should start. Insurers in New Zealand have not shown themselves to be trustworthy, and are certainly quite unsuitable candidates for self regulation where so much is at stake for the general public.

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Tuesday, April 21, 2015

A plan followed by consultation for the outstanding red zone Crown offers

Earthquake Recovery Minister Gerry Brownlee has decided that everyone can have a say on what level of pay-out should be provided to those in the Red Zones who have been ineligible so far (uninsured owners of land and property).

It is hard to tell whether the Minister has suddenly been overcome by a desire to indulge in participatory decision making or it is a device to allow public participation to be used as a shield for yet more delays followed by the same decision as before.

The news release is reproduced in full below. The original is available on the Beehive website here.

Release Date: 21 April 2015

Canterbury Earthquake Recovery Minister Gerry Brownlee has announced a process to give everyone a say on the Crown offers to owners of vacant, commercial/industrial and uninsured properties in the Residential Red Zone.

"I have asked the chief executive of the Canterbury Earthquake Recovery Authority (CERA) to prepare a Recovery Plan that looks at the offers to property owners in these categories," Mr Brownlee says.

"Following a legal challenge by the Quake Outcasts group, the Supreme Court directed that the decision on the offer to properties in these categories should be revisited and that a Recovery Plan was an appropriate approach."

Owners of properties in these categories in the Port Hills red zones have not yet received an offer.  An offer will be made to them on the basis of the outcome of the Recovery Plan but will not be less than the offer already made to those in the flat land red zones.  Consideration will also need to be given to those who did not accept the earlier offer and those who had a reduced offer as a result of significant underinsurance.

"The Recovery Plan process allows us to consider the different options, and for people to give their views based on what it means for the property owners, as well as the taxpayer and how people insure their properties," Mr Brownlee says.

"If the process results in a larger revised Crown offer from that which has expired, then those owners who accepted the original offer will be eligible for a top up of their payments.

"There will be two stages of public input through written comments in the development of the Recovery Plan, and CERA will be publicising those opportunities.

"Following the analysis of the public input and advice from officials, I expect the Recovery Plan to be finalised and decisions made in relation to the Crown offer by the middle of this year."

Wednesday, April 15, 2015

Help with making an Official Information Act (OIA) request

The New Zealand Herald is helping to re-establish a website designed to make requesting official information as easy as possible. From the Herald’s website:

The Herald is helping relaunch FYI.org.nz - a website which helps members of the public to make Official Information Act (OIA) requests.

Rowan Crawford, a software developer, set up the FYI website after a 2009 Open Government event as the first version of this tool outside of the United Kingdom.

Users of the FYI website can make requests and receive replies from various government agencies directly through the website.

The rest of the Herald article is here.

Apart from helping individuals with the OIA process, the website publishes all requests and answers so anyone can follow what is happening on a particular topic or with an agency or department. 

From a privacy perspective, if you want your request to be personal to you and whoever has the information, this website isn’t for you.  As the FYI website says on the form used to make a request:

Everything that you enter on this page, including your name, will be displayed publicly on this website forever.

Additional information on the  FYI website and privacy is here.

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Monday, March 23, 2015

Fair Insurance Code 2016– where to now?

The revised Fair Insurance Code has yet to be ratified. It is to be considered at the ICNZ AGM some time this month and “there may be minor adjustments” to the Code. One wonders what “minor” might allow by way of changes.

Will keep you posted on what is decided. In the meantime there will be a break at the Avonside Blog until early April, unless something interesting arises.

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Sunday, March 22, 2015

Concerned IAG may cash you out?

Lawyer Duncan Webb from law firm Lane Neave has written an article My insurer wants to cash settle my claim … which covers the issues IAG customers might find themselves facing. The article is here.

It is very informative, practical and a worthwhile read even if IAG is not your insurer. IAG customers are likely to feel a bit more at ease for having read it.

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Friday, March 20, 2015

Summarising the Revised Fair Insurance Code – Part 3

Insurance policies and the associated code of conduct cannot be seen in isolation from those who buy the policies, and the claims experiences they undergo. So far the Revised Code has been considered without much direct reference to the human experience. These are experiences other New Zealanders can anticipate undergoing, should there be another disaster and the Code remains substantially unchanged.

What follows, as well as what has gone before, will seem ill-informed, harsh and graceless to those in the insurer camp. They, in my opinion both here and below, are wrong.

Nature can cause devastation but it is humans who layer injustice and cruelty upon disaster - something insurers, amongst others, seem adept at. Of course there are those who point to the unprecedented nature of the Canterbury earthquakes, as if this justifies all shortcomings and bad behaviour. What is not so eagerly highlighted are the precedents and parallel examples of bad insurer behaviour – Hurricane Katrina, Hurricane Sandy, the Queensland floods. With each disaster there have been variations on the same behavioural pattern.

For the people who struggle to recover after the quakes life was, and remains, very difficult. Those who made the rules changed them whenever they saw fit, to ensure their interests were protected. It did not seem to matter that the changes attacked the content of insurance policies.

Assessments were often done, and redone, to find the cheapest solution. Yesterday's rebuild became today's repair, and who knew what next week would bring. Challenge the quality of the assessment and the lightly veiled threat was sometimes there – we may come back with a lower number. Quite possible, yet voiced in a way that made plain the intent was threatening, not neutral.

Then there was what seemed to be sleight of hand, with like-for-like bearing little resemblance one to the other. Or significantly sloping floors deemed level enough, cracks like continental drift that resin was going to fix, and pre-existing damage that didn't exist pre-earthquake. This was followed by repairs and rebuilds that sometimes took too long and were of substandard quality.

What toll has this taken, and will it continue to take? Many people took to pharmaceuticals to cope, others self-prescribed with alcohol and tobacco. Some still do. Neighbours worried about neighbours, and watched alcohol and tobacco consumption rise as morale and the ability to cope decreased. Occasionally there was an informal suicide watch on someone who was despairing and withdrawn. There were attempts at suicide.

Earthquakes frighten most people, it is the pattern of abusing behaviour experienced afterwards that drains the life out of them. Insurers, their agents and contractors, (along with EQC and to lesser the government and CERA) have done great harm and it has not yet stopped. As recently as yesterday IAG announced that it was going to cash out many of it's customers so deadlines could be met. A convenient way of passing escalating repair and building costs on to customers?

Do insurers hope that time will make the past hazy and, with suitable branding and promotion, they will be able to return to business as usual? The Revised Code, in my opinion, suggests they at least hope that no matter what occurred over the last nearly five years, they will be able to return to their preferred modus operandi with minimal inconvenience.

Click the link to continue

Tuesday, March 17, 2015

Summarising the Revised Fair Insurance Code – Part 2

In this post we will look at whether the Code is fair or transparent, and whether utmost good faith remains relevant to New Zealand insurance practices.

Is it a Fair code?

No.

There is no definition within the Revised Code explaining what fairness is. In the world of dictionaries there are varying definitions, with the Oxford Dictionary giving this: “Impartial and just treatment or behaviour without favouritism or discrimination”.

  1     Using this authoritative definition it is quite obvious the Revised Code is not impartial. The Code has been written by insurers, for insurers. The Revised Code has omitted a large portion of what was asked for in submissions to the Review – changes and provisions that would have make the Code less partial towards insurers.  

  2     The Revised Code continues to require customers to anticipate and comply with sometimes unclear or unknown requirements. It then allows insurers to penalise them for not complying with the requirements. This cannot be considered just treatment.

An interesting comparison is that between the New Zealand situation and how the U.K. handles disclosure of important information i.e. information both the insurer and the customer must provide to each other to ensure both understand the obligations and risks associated with the policy.

The U.K. Financial Ombudsman Service has published information on how it handles complaints when an insurer forms the view a consumer (customer ) has not disclosed everything they should have (here).

There is a section, what was asked and how it was asked, which includes:

We will then consider whether the questions the insurer asked were clear - and whether the consumer answered them correctly.

We will bear in mind that a consumer can only answer questions to the best of their knowledge and belief - and it may not be reasonable to expect a consumer to have a precise recollection of when certain events happened. So we will look at whether the insurer made it clear that the consumer should check their records rather than guess.

The section that follows, what doesn't need to be disclosed, includes:

We are unlikely to say an insurer should have expected a consumer to provide information if we think:

  • the insurer did not ask a specific and clear question which - if answered honestly - would have given them that information
  • the consumer did not know the information or
  • the consumer could not reasonably have been expected to know.

And we usually say it is not reasonable to expect a consumer to provide:

  • facts of law
  • information already known to the insurer - for example, facts the insurer should have noted in a surveyor's report where it had already carried out a property survey
  • information that we decide the insurer should reasonably be expected to know - for example, where a consumer answers "see your records for claims history" and the insurer does not check them
  • information that the insurer has waived its right to know
  • information that reduces the risk to be covered by the policy and
  • information about convictions spent under the Rehabilitation of Offenders Act 1974.

The Revised Code would be much fairer if it included provisions to cover these situations. Why were they not adopted?

  3     The mix of plain English and insurance terms in the Revised Code deliberately favours insurers, discriminating against those not familiar with the world of insurance, business in general, or lacking ability in English.

Could ICNZ have done a better job? Is there another Code that could have been used as a starting point?

The Australian equivalent of the New Zealand document is the Code of Practice. The title is much more accurate and the document itself superior to the New Zealand Code in some areas. A copy can be downloaded from here.  The recent changes in the U.K. would also have provided a superior model. Why were these not used as a basis for the New Zealand Code? Because they are more customer focussed – an undesirable change to the preferred business model? 

Transparency

There is far too little openness and clarity in the way in which insurers operate.

As mentioned above key words and expressions are undefined and open to convenient insurer interpretation. Beyond the policy there is a lack of transparency covering how some claims are investigated and what information is gathered. Where disputes arise, the insurers’ review agencies operate behind the scenes where the customer cannot see or participate in the process.

  1     From the beginning key requirements and concepts are deliberately undefined (e.g. material, properly maintained, reasonable). This leaves the customer uncertain or unaware as to what is required or offered. 

Insurers seem capable of determining how such terms are to be used when processing a claim, yet not when asked to define them in advance.  A variation on situation ethics perhaps, where - instead of determining meaning based on situation – meaning is obscured to allow it to be defined depending on who will be the beneficiary?

  2     Insurers have a track record of hiding their actions through delaying or withholding information requested by customers using the Privacy Act 1993.

While the Revised Code promises that there will be ongoing communication with the customer, the commitment to doing this consistently and openly has yet to be demonstrated. Post-earthquake there were numerous situations where insurers would not fully release information they held when it was requested.

A very recent non-earthquake case in point is that of an insurer inappropriately claiming legal privilege for information sought by a customer. It took a complaint to the Privacy Commissioner for the customer to be able to get access to that information (the case note is here).

  3     In a range of areas insurers have responded to claims by finding  breaches of the policy and disallowing the claim and, on occasions, cancelling the policy. These can be disproportionate actions and have caused ongoing criticism. The Revised Code attempts to improve on this by stating )Para. 20:

If you do not tell us something that would have affected our decision to insure you or the terms under which we insure you, we may refuse to pay all or part of your claim, or we may even cancel your insurance from the start date of your policy. We will respond reasonably in relation to what you did not disclose.

How transparent is this? What does “respond reasonably” mean in the last sentence?

FAQ 7, 3rd paragraph tells us that this is a reflection of Australian and U.K. developments and that ICNZ is “effectively moving toward the legislative changes elsewhere”. In response to an article on insurancebusinessonline.co.nz (here) the CEO of ICNZ elaborates further:

“Our guidelines to members on the ‘reasonable’ response to non-disclosure cite UK law in this area and reasonableness will be determined by the independent Dispute Resolution Schemes.”

In saying this, there is no indication of the guidelines to be used.  Do they exist? If so, where are they? Why not publish them?

The U.K. has already taken a public position on what responding reasonably means by simply dividing these situations into three categories.  The following approach is excerpted from the U.K. Financial Ombudsman’s website (here).

  1.  If we decide that the consumer took reasonable care, we generally say that the insurer should disregard the misrepresentation. This means that if the insurer has avoided the policy, it should be reinstated as it originally was. And if the insurer accepts the claim, it should be settled in full.
  2. If we think the consumer did not take reasonable care when answering, we usually consider a "proportionate" response to be appropriate. There is a section about proportionate responses below. [Note: in Schedule 1 of the U.K. legislation mentioned a few paragraphs below there is a formula for determining the appropriate value of the claim]
  3. But where we consider that a misrepresentation was deliberate or reckless, we may say it is reasonable for the insurer to avoid the policy. [Note: in some cases the premiums might be refunded to the customer].

This seems quite enlightened, compared to the New Zealand Fair Insurance Code, and one wonders why it was not adopted in full and published in the Revised Code.  In light of this, the ICNZ view that the Revised Code is “effectively moving towards the legislative changes elsewhere” seems just empty words – more puffery?

It is also interesting that ICNZ have made no mention of the U.K.’s  Consumer Insurance (Disclosure and Representations) Act 2012 which has replaced the concept of utmost good faith. It is a much more fair and reasonable approach to information disclosure, the obligations of the parties, and how non-disclosure is to be handled. ICNZ have not mentioned this in association with their desire to keep utmost good faith as a mainstay of their Fair Insurance Code, Where is the transparency?

  4     The way the insurers' independent review authorities conduct themselves lacks transparency (and capacity). Taking the ISO as an example, once a complaint reaches them their review process is done behind closed doors. The customer cannot go to the ISO and explain the issues, the ISO just looks at the paperwork, checks what has happened against the policy document and makes a decision. The customer has no idea what was considered, how well the ISO understood the complaint, and had no opportunity to put their case.

Utmost Good Faith

Much has been said about this. Perhaps all that is left is to repeat that practically all of the utmost good faith disclosure requirement falls on the customer. Insurers, meanwhile, enjoy a great advantage from minimal obligations, taking comfort and protection behind the highly evolved predatory aspects of the utmost good faith principles.

As in the U.K. this concept needs to be replaced with statutory provisions that are fair to both parties, and provide a transparent mechanism for dealing with disputes about disclosure.

Changes are needed, and insurers cannot be entrusted with this. Following the U.K. lead with their Consumer Insurance (Disclosure and Representations) Act 2012 would be a very good place to start.

 

Next post: insurer conduct and honesty.

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Thursday, March 12, 2015

Summarising the Revised Fair Insurance Code and its shortcomings – Part 1

The Fair Insurance Code serves two purposes: operational and political.

Operationally the Code exists to briefly sketch how insurance processes work, to make customers aware that both insurers and they have rights and obligations, and that failure to fulfil the obligations carries penalties. In practice the Code places wide, strict and complicated obligations upon customers and narrow flexible obligations upon insurers.

Politically the Code exists to create the appearance of a fair and robust self-regulating regime. Creating and promoting this appearance is a defence against attempts to regulate the industry and reduce the power and enormous advantages insurers have in their dealings with customers.

Criticising the Code

Finding fault with the Revised Code has attracted the criticisms of being ill-informed and not understanding the 300 year old history of one of the cornerstones of the insurance industry: utmost good faith. At a superficial level these criticisms appear to have validity.

It would, for instance, be unusual for those working with, aligned to, or paid for by the insurance industry to criticise the narrow obligations placed upon insurers. The fact that insurers make only a small contribution to the utmost good faith requirement is the result of minimal and preferential regulation and favourable court decisions over a long period of time. As that is a comfortable and defensible position to be in, those aligned to insurers find nothing wrong with it.

What is ignored by the insurer camp is that the evolution of legislation and case law has created a situation considered draconian by others because of it's one-sidedness. In Britain there are some working to have the utmost good faith provisions removed from insurance, and replaced with something more equitable. That approach may be appropriate here if insurers do not accept the need to contribute more as their part of the utmost good faith requirement.

While ICNZ may be genuinely perplexed at criticisms of a well established and long accepted status quo, that is a narrow and excessively self-serving position to take. Pre-earthquakes, when insurance injustices were fewer, small, and smothered by the complexity and cost of court action there was no evidence of a need for change. The magnitude of the post-earthquake insurance disaster with it’s lack of fairness, honesty, transparency, and appropriate conduct shows there is a need for significant change.

The operational Fair Insurance Code.

Operationally it is a self-serving industry code rooted in commercial and legal conservatism that has evolved as little as possible over time.

This 2015 revision of the Code represents the insurance industry's best effort at improving it's performance and image, after the negative publicity arising from bad to abysmal post-earthquake claims handling. As the posts on this blog have shown the improvements are small, and don't address fundamental problems.

Some procedural changes have been introduced to provide a clearer understanding of what will happen when a claim is made. These changes also add more process and information on how differences and disputes between insurers and customers will be handled, and the consequences for insurers who fail to comply with the Fair Insurance Code.

In practice the changes are small and avoid substantive issues that can be summarised as falling into the categories of fairness, utmost good faith, honesty and insurer conduct.

The Revised Code is significantly deficient in not placing an appropriate range and depth of operational obligations on insurers, and needs much additional work to fix these failings.

Politics and the Fair Insurance Code

Wherever large corporations encounter criticism of their business model they, and their political supporters, lobby strongly for self-regulation rather than have laws passed to enforce appropriate corporate behaviour.

Once self-regulation is allowed it then becomes an exercise in allowing as much latitude as possible to business while conceding minimal rights to the customer. At the same time publicity is generated to create the impression that self-regulation is working well and is as effective as, or even more effective than, government intervention.

This practice is happening now with insurance. The bulk of the Revised Code involves imposing wide ranging obligations on customers while minimising insurer obligations. By calling it fair, and ignoring the widespread post-earthquake failings, insurers hope to be able to carry on business without conceding any of the opportunities they currently have and profit from.

To have a successful Code insurers don’t need one that provides great improvements for customers, they need only have something that their business and political supporters will feel comfortable backing. With this backing they can then avoid legislation to curb their behaviour.

 

In the next post there will be a summary of the Revised Code's failings in the areas of fairness, utmost good faith, honesty and insurer conduct.

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Monday, March 9, 2015

Fair Insurance Code Questions & Answers – Part 3

In the previous post, covering FAQ 7, it was stated that an underlying purpose of the Code was to pre-empt any external control on how insurers carried out their business. The point was also made that as far as interpreting insurance policies is concerned, insurers are very strong advocates of the Humpty Dumpty Position:

"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean - neither more nor less."
(Through the Looking Glass – Lewis Carroll )

FAQ 8 is where they excuse themselves from attempting to clarify what is meant by what they say.

Saturday, March 7, 2015

Fair Insurance Code Questions & Answers – Part 2

Why is ICNZ so keen on having a Fair Insurance Code, and prickly over criticism directed at the Code?

At an operational level the Code is a useful means of providing a standard approach to offering, selling and administering insurance. This has benefits to insurers as they want customers to have a feeling of ease and security in buying and keeping insurance. It works quite well, with New Zealand having an extremely high uptake of insurance which, in turn, means significant revenue for insurance companies.

At the political level the Code is one of the means used by insurers as they work to prevent or obstruct legislation to regulate the insurance industry. Unrestrained self-regulation is their on-going goal, and the Code is the part of the public face of how they go about it.

Prior to the earthquakes insurers operated without public scrutiny and there seemed to be no shortcomings (unless you dug deep). Should the fairness and suitability of the Code now be successfully challenged then the future of the current level of self-regulation becomes uncertain, and the preferred form of business-as-usual threatened.

The loud and frequent post-earthquake requests for more legislative change and oversight of the conduct of insurers is the crux of much of what is motivating insurers in this revision of the Code. They fear legislative change will put limits on their freedom to operate in a way that is highly favourable to them.

Click on the link to continue

Friday, March 6, 2015

A helpful change to the insurance disputes process coming up?

Yesterday Paul Goldsmith, Minister for Commerce and Consumer Affairs, announced  the opening of consultations on changes to the maximum amount that could be taken to the insurance industry’s disputes resolution services (the full media release is below).

The change proposed is an  “… increase to the cap on the compensation that dispute resolution schemes can award in relation to disputes about real property insurance claims. The proposed increase is from $200,000 to a minimum of $350,000.”

Post-earthquake, only disputes up to $200,000 could be considered by the insurers’ independent dispute resolution services. Beyond that amount disputes had to be taken to the High Court, an action too expensive for most people. Insurers could have agreed to have larger amounts considered, but this did not seem to happen. As a consequence many homeowners were, in effect, coerced by insurers into a take it or leave it situation. At the time there was significant demand for the cap to be raised.

The government’s proposal is in two parts. The first is to increase the maximum amount to at least $350,000. The second is to back-date eligibility for access to the amended amount to 2010, allowing those currently in dispute with their insurers to avoid the High Court process. Full details are in a document on the MBIE website here.

The submission process is relatively straight forward. MBIE require submitters to use a template (available on their website here). The document has a list of 15 questions they would like your answers to. Download it, fill it in, and e-mail it back to them.

If you think you might want to give it a go, but aren’t certain about the questions, give me a week or so to finish with the revised Fair Insurance Code and I will go through the submission questions.

Those wanting to make a submission have until 5.00pm on the 9th of April (Thursday after Easter) to make a submission to the Ministry of Business Industry and Employment. Information about the submission process is here.

 

Back to the Revised Code FAQ tomorrow.

Click the link to read the media release.

Thursday, March 5, 2015

Kaiapoi Red Zone photographic exhibition


The Kaiapoi Public Library is currently hosting an exhibition of Red Zone photographs by Cosmo Kentish-Barnes.

Kaiapoi_Gallery

Cosmo  spent a few months around Kaiapoi photographing earthquake damage. From this arose a project to photograph "exiled residents" in front of their red stickered homes, or the land where once they had a home.

Each photograph is accompanied by a brief account of the post-earthquake life of one of the people in the photograph. As someone who has shared the experience of those he photographed I felt he did an extremely good and sensitive job.

Come and visit Kaiapoi to check out the exhibition. It is of modest size so won’t take up too much time. The library is on Williams Street, immediately before the Kaiapoi river.

Library_at_night

Kaiapoi library

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Wednesday, March 4, 2015

Fair Insurance Code FAQ – Part 1

The FAQ (Frequently Asked Questions) is not part of the Revised Code, just an explanation of the Review process and some of the positions taken by ICNZ on particular issues.

While the FAQ may give an idea of what is intended in the Revised Code, it cannot be used to make an insurer interpret the Revised Code in any particular way.

Parts of the FAQ are purely background information so there is no reason to comment on them. Other parts are revealing, and a few give reason to believe that some of what is promised in the Revised Code is shadow rather than substance.

We will do this in three posts to keep the amount of reading down.

Please click on the link to continue.

Monday, March 2, 2015

Assessing the ICNZ Revised Fair Insurance Code - Part 3

This post considers the final part of the Revised Code. As we move towards the way claims are processed there are welcome improvements.

Sunday, March 1, 2015

ICNZ make a more detailed response.

Thursday’s blog covered the Insurance Council of New Zealand’s (ICNZ) response to an article on an insurance business website. The article featured the Avonside Blog’s commentary on the revised Fair Insurance Code. The ICNZ response was strongly critical.

On Friday Tim Grafton, CEO of ICNZ, made a more detailed response elaborating on his earlier criticisms and pointing to the beneficial changes that have been made. You can read that response here.

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Saturday, February 28, 2015

Assessing the ICNZ Revised Fair Insurance Code - Part 2

As we get further into the Revised Code the number of new issues raised slows down.

Where the Revised Code deals with straight-out mechanical areas it works better and there is more clarity about what an insurer needs to conduct it’s business.  Despite this the position of the customer does not improve.

Click on the link to read more nitty gritty.

Friday, February 27, 2015

Where to from here for ICNZ?

First, a minor correction regarding yesterday's post.

The title, as originally posted, was almost what was intended, but not quite so my apologies for that. It was a bit of tongue in cheek and there was supposed to be a question mark at the end of the title – the omission was missed and I have now put one there. Even the Avonside blogger can get a little irritated and distracted when a lot of hard work is dismissed off-hand as "ill-considered" (oops, “ill-informed”.

I was going to continue the analysis of the Revised Code this morning but that has been deferred until tomorrow. Instead it would be useful to briefly consider what ICNZ might do from here.

Clearly they are unhappy with what has been termed the "ill-considered" (oops again, “ill-informed”) views expressed on this blog.  If that is the well-considered view of ICNZ then, presumably, nothing further will be said because they have put their case as succinctly as they can. Should, however, they do think there is more substance than they are willing to concede then something has to be done.

In an ideal world insurers would simply concede that customers are not going to be as well served as they would like, and rewrite the Revised Code. This is unlikely to happen.

Insurers are too comfortable having the sale and interpretation of insurance policies done exclusively on their terms and free from legislative interference. To relax this grip would be seen as detrimental to their business model. Yes, they are offering checks and balances along the way, however the personal cost of travelling along that uncertain path is high. Past and current experiences are that it is a long, drawn out process which has little cost to the insurer but extracts a disproportionately high to immense personal and financial cost for the customer. An extreme case is outlined here. Such a case is very rare, but the rarity is in the response of this unfortunate man, not in the difficulties customers face.

So what might ICNZ do? The same as all big businesses do in the face of criticism - reach for the lawyers? That may not be a bad thing if the Revised Code is subsequently modified however, as mentioned above, it is unlikely to happen.

An alternative is that a whole lot of fine, reasoned words based on seasoned experience and judicious well-considered thinking will be produced from an eminent (or pre-eminent) source to pacify and reassure us. Will it be substance or flimflam? Another alternative might be bile and invective.

Will keep you posted.

Thursday, February 26, 2015

The Empire strikes back?

A journalist for Insurance Business Online yesterday wrote an article entitled New code slammed by earthquake blogger (here). It is a concise and well organised look at how the Revised Code is being analysed on this blog.

Shortly after the article was published Tim Grafton, Chief Executive of the Insurance Council of New Zealand (ICNZ), made the following comment:

Surprised and disappointed that this ill-informed blogger, who did not submit on the new Code, was given such prominence and our views were not sought. The Code’s timeframes for responding to customers follow best practise …

The rest of the comment is the standard PR stuff used in damage control situations. So, does this blogger resemble the description of being “ill-informed” and “did not submit”?

The CanCERN newsletter for 20 February this year has an article on the Avonside Blog starting up again. Part of the text reads "Lawrence was the main man behind CanCERN’s submission to the Insurance Council on the revised code"

In addition to having written the submission, I accompanied Leanne Curtis to meet with Tim Grafton for more than an hour when he came to Christchurch to hear submissions. Tim and I subsequently exchanged an e-mail (or maybe two) of clarification after the meeting.

It would seem to me that there is no truth in the joint accusations of being ill-informed and a non-participant. Rather, if I must blow my own trumpet, I am as eligible as anyone to make comments on the Revised Code. And so I shall.

Wednesday, February 25, 2015

Assessing the ICNZ Revised Fair Insurance Code - Part 1

Now we get to the nitty-gritty. If a paragraph by paragraph analysis isn't your thing come back next week, when we will be looking at the important stuff that was left out of the Revised Code.

Click on the link to continue reading.

Monday, February 23, 2015

Comments on the ICNZ Revised Fair Insurance Code - Part 3

Some general issues

These issues arise in various parts of the Revised Code. It is useful to keep them in mind while reading the Revised Code, to see how there is a continual stacking of the document with content that favours insurers and puts customers at risk.

Keeping each other informed: As mentioned previously there is heavy emphasis on customers informing the insurer of existing and changing circumstances. This is understandable, as such information is key to the insurer knowing the status of the risk associated with the policy. Consequently, the Revised Code is laden with obligations on the customer to be forthcoming and fulsome about this. There is, however, no equivalent obligation placed upon insurers.

Section 8 of the FAQ accompanying the Revised Code excuses insurers from making an effort to provide lists of required information or summaries of policy wordings. In the absence of suitable lists and explanations customers, who are not experienced with insurance contracts, are being put at risk. The problem is increased for those who aren't familiar with legal documents or are not proficient in English.

What else might customers want to be informed about? How about up to date information on developments in insurance. At one level there is news about insurance determinations by the Insurance and Savings Ombudsman, or the Courts, that change how claims will be treated or decided. At another is reminders of important and sometimes topical items that slide past the consciousness of the general population but is important to insurers: things such as what to do after getting a speeding ticket, or losing a licence, the storage of flammable goods or house maintenance.

General media releases are cheap and convenient but do nothing to inform customers in a direct and personal way. In any other industry keeping individual customers up-to-date would be considered customer service and support, in insurance it seems to be a risky inconvenience and cost.

Statutory Rights: Continuing with past practices there has been an aversion to mentioning potentially inconvenient statutory rights.

One such area of omission has been the Privacy Act 1993. For those unfamiliar with the Act it would be very easy to draw the conclusion that information gathering, accessing, and correcting that information, is controlled by insurers – this is the way it is portrayed in the Revised Code.

Treating you “fairly”: The use of the word “fairly” throughout the Revised Code is bound to cause problems in the future. An insurance policy is a legal contract and, whenever a claim is made, what follows is determined by the legal meaning of the contract. The use of “fairly” is somewhat cynical and could be considered calculated to create a confused mind-set that in some way insurance claims are now about what is fair, and not driven by upsetting legal interpretations. Puffery with dire consequences?

The customer’s best interests: There is no mention in the Revised Code of the insurer's obligation to act in the best interests of the customer.  Where is the commitment to ensuring that, in fulfilling a claim through to completion (e.g. repair or rebuild), the insurer will protect the interests of the customer by ensuring the whole process is efficient, of a satisfactory specification and quality, and does not put the customer to unnecessary delay, expense or stress?

The bottom line: the Revised Code is superficial, creates the appearance of fairness, but does nothing to ensure that the customer is informed, empowered, or protected to any useful degree. The Revised Code is motivated more to stave off any legislation of insurance activity than correcting the shortcomings of insurers and protecting customers.

The next post, on Wednesday, will be the beginning of a clause by clause assessment of the Revised Code.

Friday, February 20, 2015

Comments on the ICNZ Revised Fair Insurance Code - Part 2

The whole viability of the insurance industry depends upon utmost good faith which, according to ICNZ on their website here, means:

An insurance policy is a contract of ‘utmost good faith’ between the insurer and the customer.

The insurer is required to observe and honour the contract conditions. The customer is required to disclose to the insurer all material facts that could affect the risk. For example, a person who travels overseas and leaves their house empty needs to tell their insurer, as an empty house is more risky to insure than an occupied one.

Failure to tell your insurance company everything they need to know to assess your risk accurately may jeopardise your insurance cover. If in doubt about what you need to declare, ask your insurance company.

A rule of thumb is that you should declare any information that would make the insurer alter the terms and conditions of your contract.

As is easily seen, the weight of the so-called “utmost good faith” obligation falls entirely on the customer who has to be sufficiently familiar with insurance practices to be able to anticipate what an insurer needs to know.

The obligation of the insurer is not one of “utmost good faith” at all, it is merely an empty statement that they will observe and honour contract conditions - a standard practice and legal requirement with all forms of contracts in all types of business. There is no requirement for insurers to fully disclose to the customer all the insurer needs to be able to agree and continue a policy. Nor must they disclose what the key terms of a policy mean, and how they will be interpreted should a claim be made. The insurer is offering nothing in return for the customers utmost good faith.

All this might be acceptable if contract conditions were fair and reasonable. Customers won’t know if this is the case unless the wording is clear and fully explained in plain English (and the equivalent in other languages). However, contract conditions are written to suit the purposes of the insurer, using words and expressions that are usefully (wilfully?) vague and can mean different things to different parties. Post-earthquake, many customers found words no longer meant what they thought and expressions (e.g. like-for-like) could be interpreted in ways that defied common sense. 

So, if you, the customer, fail to disclose or understand something, that action is likely to be held against you and jeopardise your claim. What if you didn't know something was important, might cause the insurer to alter the terms and conditions of the contract, misunderstood or just didn't know? You are at the mercy of the insurer who, in signing up to the Revised Code, now agrees to being “reasonable” when dealing with you. As there has been an absence of reasonableness with many claims to date this is not a cause for optimism.

Utmost good faith, which underpins insurance, appears to be a one way street – customers are obliged to act in this way, insurers are not. This in itself is evidence the Revised Code has fallen well short of what would be a reasonable minimum – that both parties be required to be equally responsible to act in utmost good faith.

The next post on Monday will pursue the shortcomings of the Revised Code as a whole.

Thursday, February 19, 2015

Comments on the ICNZ Revised Fair Insurance Code - Part 1

An initial reading of the Revised Code creates the impression of it being a reasonable document. If you were not familiar with what had happened with insurance claims post-earthquake a second glance would seem unnecessary.

To not take a second look at the words used, but bask in the warmth and comfort promised by the publicity hype, would be a dangerous oversight. Dangerous because post-earthquake insurance claims created an environment which highlighted both new and existing problems, and these have not been dealt with.

Disasters bring about the unexpected, create new problems, and put people on the spot. The major initial problem was the scale of the work facing insurance companies. As with EQC and the Christchurch City Council, the scale of the problem was beyond both their organisational ability to respond and also the adaptive capacity of most of the leadership.

Adding complexity to this was was the rapid involvement of re-insurers whose sole interest was reducing their exposure to costs. The spectre of re-insurers extending their influence, and demands for minimising costs at the level of individual properties, haunted many waiting for their claims to be assessed. It seemed to explain a lot of unexpected and unwanted behaviour on the part of insurers (staff, agents and contractors). However, not every problem can be laid at the feet of international avarice (more about these guys in a later post).

Insurers continued with their pre-earthquake procedures, this time on an incredibly larger scale. For the first time enough problems affecting customers were apparent to see that there was a pattern in insurer behaviour: not all insurer employees (or agents or contractors) were suitably trained, qualified or competent, some had behavioural or inter-personal deficiencies and treated customers badly, on occasions in a bullying or threatening way, there was a pattern of insurers attempting to minimise claims, reinterpreting policies, changing assessments or positions (sometimes frequently), making decisions on behalf of customers that did not adequately protect them, refusing to volunteer or denying or delaying access to claim information, delaying access to dispute resolution.

When considered in this light the question to ask is: does the Revised Code remove these problems? The answer is no.

Some of the content of the Revised Code is dubious, and there are instances where it seems self evident (blindingly obvious?) that the intention is to maintain a situation that acts against the interests of customers to ensure insurers continue their disproportionately dominant position during claims processing.

Basically, as discussed in the next post, the Revised Code represents a lack of good faith on the part of insurers.

Tuesday, February 17, 2015

The Revised Fair Insurance Code

There has been a flurry of insurance related developments this month. Recently EQC covertly released a Customer Interaction Review on how they had performed and on Monday Vero released a report about Canterbury four years on, outlining Vero's experiences, the improvements made to it's processes and how it envisages future disasters should be handled.

The most significant release has been that of the Insurance Council of New Zealand (ICNZ) who announced their Revised Fair Insurance Code. The Fair Insurance Code is the code of conduct all major insurers have signed up to and, in general terms, it outlines how an insurer is required to behave.

Despite the glowing terms with which ICNZ have described their Revised Code a close reading of it shows they have produced very little in the way of a fair, transparent or customer friendly way of doing business.

The effect of much of what was raised by submissions has been changes to treat some of the surface issues, but not address important underlying problems caused by the way insurers carry out their business in New Zealand. This is not a healthy situation for customers of insurance companies, and continues to validate the proposition that the insurance industry is not a suitable candidate for self-regulation.

The next few posts will start with a summary of how the Revised Code reads (recommended reading for everyone) followed by a commentary on the Code and the accompanying FAQ and finish with a look at all the important bits ICNZ decided to leave out.

Click on the link for the rest of this post …

Thursday, February 12, 2015

The Avonside Blog will be back in action soon

There are a couple of items of unfinished business relating to insurance and Official Information Act requests to be addressed. As a result there will be a few postings over the next couple of weeks.