Vero and the Insurance Council of New Zealand (ICNZ) have hit back at a suggestion insurers are trying to cut Canterbury quake claims by pushing costs onto the state.

Earthquake Commission (EQC) Chairman Michael Wintringham says insurers face huge costs settling commercial and residential claims.

“In this environment there is an incentive for insurers to reduce their own liabilities by shifting costs to the Crown or to other parties,” he wrote in the EQC annual report.

Vero NZ CEO Gary Dransfield has issued a statement saying the comment is “speculative, unsubstantiated and damages the reputation of major insurance companies and their hard-working claims-management staff”.

In response, Mr Wintringham, a senior public servant, has stood by his comments, prompting the ICNZ to write to him saying insurers will not shift costs to the Crown or any other parties unless that is where they legally belong.

The EQC pays the first $NZ100,000 ($78,000) of residential earthquake damage before private insurers step in, so the state-owned body and private companies interact on claims.

Mr Dransfield says Mr Wintringham’s comments suggest insurers may act, or are acting, improperly when in reality their contribution has saved the Government billions of dollars.

“About 80% of the expected $NZ20 billion ($15.7 billion) rebuild cost will be met by insurers and reinsurers,” he said.

In his response, Mr Wintringham says the complexity of the situation – with calculations apportioning damage per event and significant extra costs for rebuilding foundations – means the boundary between the responsibilities of the EQC and insurers is not always clearly defined.

“Furthermore, in addition to our respective responsibilities to our customers, the EQC as a government agency has statutory obligations, and the private insurers have obligations to their shareholders.”

Mr Wintringham says both the EQC and insurers must show reinsurers they are striving to discharge their obligations as cost-effectively as possible.

“I would expect any commercial organisation to pursue any opportunity to share costs more advantageously,” he said. “The point is the people of Canterbury should not be the ones to endure delay or uncertainty while such matters are resolved.”

New ICNZ CEO Tim Grafton wrote to Mr Wintringham, copying the letter to Earthquake Recovery Minister Gerry Brownlee, saying the comments convey a false impression and the council’s members reject any suggestion they would manipulate or reduce their own liabilities by inappropriately placing them on others.

Mr Grafton, who started at ICNZ a week ago, told insuranceNEWS.com.au he intends to work constructively with the EQC and wants to make it clear insurers will meet their legal obligations.

“The insurance companies are very clear that they will not be moving beyond the strict confines of all, or any, contracts in place in the wake of the Canterbury earthquake,” he wrote.

“Members of the Insurance Council feel strongly that the words used indicated that insurers may act in an unethical way and this will not be the case.”