The Insurance Council of New Zealand (ICNZ) is assessing issues around damage to homes used as methamphetamine laboratories.

“It is another area where there is a great deal of uncertainty in play, with one expert challenging another about the risks posed and remedies required,” CEO Tim Grafton said in response to an article on a New Zealand financial advice website.

The article by Shine Lawyers New Zealand MD Andrew Hooker attacks insurers for not covering damage caused by either meth consumption or manufacture.

“While New Zealand’s homeowners are struggling to come to grips with this scourge, the insurance industry has again wiped its hands and amended its policies to severely limit cover,” Mr Hooker wrote.

“Most insurance policies covering rental properties now limit damage caused by manufacture to $NZ25,000 ($23,337).

“Research and reality dictate this is never going to be anywhere near enough in many cases.”

Mr Grafton says there is uncertainty on the extent of the problem and claim costs.

“It is difficult to model the costs to help inform actuarial assessments that help set premiums,” he said. “So insurers will take a cautious approach to the cover they will write, and place limits on the exposure. To do otherwise would require pricing in margins for uncertainty, a cost that would be borne by all homeowners.”

Mr Hooker argues the tests required by insurers to determine meth contamination are unreliable.

“Insurance companies rely on what has been shown to be, in some cases, quite dodgy science to identify the level of meth contamination,” he said. “Scientists who are specialists in the area question the accuracy of these tests, and real cases identify huge discrepancies in terms of the level of contamination between tests in the same property. 

“The processes being relied upon to identify and quantify the level of meth contamination are often unreliable.”  

Mr Grafton says some insurers provide cover for meth damage.

“But as with any risk, it is never simply a matter of transferring it to someone else – there is an obligation we have to ourselves to avoid risks if we can,” he said.

“Due diligence and inspection of a house may avoid the pitfall of purchasing one that has been contaminated.” 

Mr Grafton says ICNZ has joined an expert group examining the standards that should apply, so it “can get clarity and certainty”.