A survey of manufacturers in the earthquake-stricken Canterbury region has discovered widespread dissatisfaction with business interruption coverage.

The Christchurch-based New Zealand Manufacturers and Exporters Association says only 20% of the survey respondents gave their insurer a positive rating and half the companies surveyed said their insurer was “very poor” in responding to business interruption claims.

The association does not disclose its membership or the number that responded to the survey.

CEO John Walley told insuranceNEWS.com.au respondents say claims payments have been too slow and fine print makes it hard to substantiate a claim.

He says that business-owners are complaining about how many loss adjusters they have to deal with. And more than a year since the February 2011 quake, repairs, and the business lost while they occur, will take place outside the business interruption indemnity period for some firms.

“There is a view that the indemnity period should be extended in these cases and there is some talk of legal action if insurers do not comply,” Mr Walley said.

Marsh NZ CEO Grant Milne says the series of quakes in Canterbury has highlighted how some business-owners do not understand business interruption cover.

For instance, owners assumed their gross profit would be replaced, with no accounting for costs that were not being incurred, or thought they would be reimbursed for extra costs of running normal business operations.

He says business interruption cover does not respond to wide area damage, where a business might still be operating and have no physical damage but the customers have left because of the quake.

Mr Milne says the earthquakes have thrown up many scenarios that are not covered by business interruption. And while there is potential for the industry to review the scope of the cover, “the challenge will be whether the insurance market has the appetite to accept these additional covers because some of these things are potentially outside the normal scope of traditional insurance and hard to quantify”.

When the manufacturers were surveyed on how their insurer responded to claims, 41% of respondents rated their insurer as poor.

Just over 40% rated their insurer as good in rolling over their insurance policy, and 9.1% said the insurer was very good. None of the companies, surveyed in February, rated their insurer as poor when it came to renewing the policy.

Mr Milne says clients are not dropping business interruption cover but more are considering a longer indemnity period and increasing the sum insured.

When 150 Marsh client executives met in Auckland two weeks ago, Mr Milne asked them how they felt insurers had performed, and he says there was general agreement that insurers had done their best.

He said insurers helped businesses in the early days by making progress payments.