The Earthquake Commission’s (EQC) cap for building cover will be raised to $NZ150,000 ($144,170) and residents will have to lodge claims via their private insurers under reforms announced by the New Zealand Government today.

“Requiring EQC claimants to lodge claims with their private insurer will help the EQC and private insurers work better together in future,” EQC Minister Gerry Brownlee said.

The proposed EQC Act reforms follow a discussion paper in 2015 and consultations.

Under current rules the commission handles claims up to $NZ100,000 ($96,113), with “above-cap” claims then passed to private insurers.

The Government, which faces an election on September 23, plans to continue working on the proposed changes and hopes to release a draft bill later this year or early next year. Changes would likely take effect in 2020.

Under other changes, the EQC would no longer provide residential household contents insurance, and the reforms clarify that land cover is for natural disaster damage that directly affects the residence or access to it.

The Insurance Council of New Zealand (ICNZ) says it supports the thrust of the reforms but the changes do not make clear that insurers should be responsible for assessing and managing claims for house damage, not just receiving them in the first instance.

“The worst outcome would be if the law requires all claims to be lodged with insurers, and then that information is passed to the EQC to assess the damage and manage the settlements for our customers,” ICNZ CEO Tim Grafton said.

“Insurers are wanting to make this simpler and more efficient for their customers, not more complicated.”

Mr Grafton says claims-handling arrangements piloted after the Kaikoura earthquake, with private insurers involved earlier in the process, have paved the way for a similar approach in future.

“There still will be learnings from this exercise, so there needs to be some review of how this has worked, but certainly it is a vast improvement,” he told insuranceNEWS.com.au.

ICNZ says the Government has listened to its request for some form of land compensation in addition to building cover.

“This means that where land damage has occurred, separate funding to the building cover is available to fix the land or access to the property, so the house can be repaired or rebuilt,” Mr Grafton said.