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Friday, 11 May 2012

EQC - Apportionment

This morning's Press has an article C'mon EQC, explain apportionment by Will Harvie (here). It is a good read and pointedly questions the whole process.

EQC  responded (reproduced below), without saying anything of much use, drawing attention away from how it is being done by describing why.  I have underlined one sentence, just over halfway done the response - notice how homeowners aren't considered to have a financial interest in the whole process. Not only that, it seems it is not important to maintain our confidence either (next paragraph).

The following is from EQC's Facebook page:

EQC Customer Services GM Bruce Emson replies to a blog post from the Press' Will Harvey: (click the link to read the rest)

Hi Will, You’re right – we haven’t explained our apportionment process well. So here goes.
In mid-2011, EQC and the Insurance Council asked the High Court to make a declaratory judgment on whether cover renews after each earthquake or not. The court declared that EQC cover is renewed after each event, so long as the property remains insured. This means EQC needs to determine what damage to a property was caused by each event.
The problem is, there were 13 earthquake events between the September 2010 shake and the end of June 2011, generating 400,000 claims, so we don’t always have an assessment to match every claim.
Before the judgment, that didn’t matter. All EQC had to do was add up the total damage and pay our share, up to $100,000 +GST. Now we have to determine our share for every damaging quake.
If we have assessments for every claim we can apportion and move on very easily. If not, we have to find a way of getting that information. Sometimes we can use private insurers’ information, most times we can’t.
We can also talk to the homeowner, but many don’t have precise details about the extent of damage each quake caused – especially for situations where they don’t live in the house in question (ie: landlords).
So we look for a proxy, and the most practical available is to look at what happened in the houses around your one, and what proportions of damage they suffered.
Currently, this is a manual process of searching for near-by properties, and analysing their claims. It takes a while. We have improved from 2-3 properties per staff member per day to as many as 10 per day, depending on the complexity of claims. We have well over 100,000 properties to do this process with.
Currently a team of 40 has allocated damage across 21,000 claims.
EQC is working to develop an automated process, but it needs to be better than the manual one. This sort of sophisticated business process would normally be developed over a number of years, but we don’t have a number of years.
Any process we develop has to meet with agreement from the other parties financially involved – the insurers and the reinsurers.
Maintaining confidence of reinsurers is more than a courtesy – the amounts they charge for their service, or the extent they provide cover at all, make an enormous difference to NZ’s economy and homeowners paying insurance premiums.
It’s not all bad news, though. Customers who will clearly be over the $100,000 +GST cap, or clearly under cap, no matter how their damage is apportioned, are carrying on through the settlement process without further delay.
Only customers like you, with a claim very close to the $100,000 cap which could go either way depending on the allocation of damage are in the position of waiting for the apportionment process before getting a cash settlement or repairs.
So there you have it. It’s probably not the outcome you wanted Will, but it is hopefully a bit better explained.
Bruce Emson

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