The Insurance Council of New Zealand (ICNZ) is “broadly supportive” of proposed changes to the Earthquake Commission that would see insurers take the lead in handling claims.

Under the Government’s reform package, announced today, the EQC would exit contents insurance, with private insurers willing to take on the business.

EQC building cover would be extended to include site works and access ways, removing the current friction between building and land cover.

As a result, the EQC cap would be doubled to $NZ200,000 ($177,574).

This is expected to reduce interaction between the EQC and private insurers on over-cap claims by about two-thirds, and could also lead to lower premiums.

Under a move to improve claims experience, claimants would need to lodge EQC claims with their private insurer.

Over time insurers would be expected to take an even greater role in the claims management process.

ICNZ CEO Tim Grafton says the proposals would benefit customers and pave the way for a more effective response to future disasters.

“It makes sense that the first contact people make when an earthquake strikes is with their insurer and not the EQC,” he said. “Many people will go for years having no direct relationship with the EQC at all, but they do know their insurer.

“We also believe insurers should be handling all claims, some of them on behalf of the EQC, which had only about 24 staff when the first Canterbury earthquake struck. That required them to scale up to about 1800 staff to manage the claims that poured in.

“Claims-handling is a core daily function of private insurers. They employ thousands of staff who are on hand to respond 24/7 and handle more than 1 million claims a year.”

ICNZ backs the plan for insurers to pick up all contents damage, but says the level of the EQC cap and other technical issues must be looked at in detail.

Submissions on the proposals can be made until 5pm on September 11, with a bill expected to be introduced to Parliament early next year.