The Insurance Council of New Zealand (ICNZ) has called for changes to the Earthquake Commission (EQC) Act so private insurers can assess claims first.

In a submission on proposed changes to the Act, CEO Tim Grafton says the requirement that all claims be lodged with and assessed by the EQC left homeowners and insurers unaware of hundreds of “over-cap” claims for years after the 2010/11 earthquakes.

“Claims should therefore be lodged and assessed by insurers, because one without the other does not solve the problem,” Mr Grafton said.

“Also, insurers’ core competency is the management of claims, so legislation should make it clear that insurers and the EQC should enter contractual arrangements to that end before a new Act comes into effect.”

ICNZ says it does not seek to change the system under which the EQC picks up the loss under a set cap and private insurers cover the loss above it.

“This keeps insurance affordable and maintains natural disaster cover for New Zealand homeowners. It has meant New Zealand is the envy of the world in providing about 98% residential cover for natural catastrophe.”

It also agrees with the Treasury’s proposal to remove contents cover from the EQC.

However, it disagrees with a plan to combine site work into a single building cap, arguing it risks leading to underinsurance.

Instead it wants two separate covers: land work and building cover, with the former covering all foundation work required to create a building platform. 

Insurers would still be liable for foundation work up to that required if a house were rebuilt today, but the EQC would pick up the additional foundation land work needed due to the earthquake.

ICNZ also proposes increasing the building cap to $150,000, acknowledging the cost allocated to land work.

Mr Grafton says ICNZ’s submission has set aside commercial interests to “put the needs of New Zealand and New Zealanders first”.

“Our focus is to ensure people are rehoused as efficiently as possible after a natural disaster and to keep insurance cover affordable and available,” he said.

“There were times when we could have put up a case that only served our commercial best interests, but that was not the right thing to do.”