Southerly by David Haywood

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Southerly: Tower Insurance Have Some Bad News For You

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  • webweaver, in reply to Sacha,

    I agree - this has all the hallmarks of a deal struck between the govt and all the insurance companies - which means that none of the rest of us can switch policies to a better insurer because they're all behaving in the same appalling manner. Bastards.

    It's like a bloody cartel. Aren't there laws against those?

    Don’t we call that collusion?

    from what Nades heard tonight, that would definitely seem to be the case:

    Went to the community briefing here this evening and the insurance rep there confirmed that this would be same/similar for all insurance companies.

    Wellington • Since Nov 2006 • 330 posts Report Reply

  • Sacha, in reply to webweaver,

    It's like a bloody cartel. Aren't there laws against those?

    The CERA enabling law gives government the power to do pretty much anything they like. Remember which parties voted for it, come November.

    Ak • Since May 2008 • 16838 posts Report Reply

  • Yip Yip,

    I understand how frustrating and upsetting this but it is not a loophole. It is quite clearly stated in your insurance policy that Tower does not pay out for damage/loss caused by destruction by the government. It will likely be in every other company's wording. This was a government decision which is not an insurable event.

    Insurance companies have to work within their policy guidelines partially because of the fiduciary relationship they have with their customers (in this case, particularly those customers not affected by the earthquakes) and partially the obligations they have to their reinsurers.
    Insurance companies do not work in a vacuum. They are responsible to a number of parties and, as such, must act within the confines of their policy contracts.

    It is not the company trying to weasel their way out of paying you.

    Like I said, I understand how upsetting it is and I feel for you. It must be a terrible experience. But it is not the fault of the insurance companies.

    Christchurch • Since Jun 2011 • 6 posts Report Reply

  • Yip Yip, in reply to nzlemming,

    Don’t we call that collusion?

    No, because it stated in the policy contract that government destruction is not covered.

    Christchurch • Since Jun 2011 • 6 posts Report Reply

  • Sacha, in reply to Yip Yip,

    This was a government decision.

    Exactly

    Ak • Since May 2008 • 16838 posts Report Reply

  • Bart Janssen,

    So if your house in the red zone burned to the ground you'd get full replacement?

    Seem's to me fires in earthquake damaged homes would be fairly frequent.

    Auckland • Since Nov 2006 • 3434 posts Report Reply

  • Kyle Matthews,

    Andrew Geddis picks up the story today at pundit, and follows through to explore what happens if you don't take the deal:

    Now, we can't say for absolute certain, and the Minister himself may not yet know for sure, but I think it's pretty clear that there won't be anyone allowed to stay living in the Red Zone. That's certainly the implication of this news story. So folks who won't sell voluntarily will, I suspect, find themselves selling involuntarily after 9 months.

    Except, here's the rub. If your land is acquired compulsorily under the Canterbury Earthquake Recovery Act 2011, you get compensation under subpart 5. And that compensation is determined by the Minister in accordance with s.64.

    And s.64 makes it crystal clear that "in the case of the compulsory acquisition of land, [compensation is determined] as at the date of the compulsory acquisition"; meaning "the Minister must determine compensation having regard to its current market value as determined by a valuation carried out by a registered valuer."

    So, here's the position those in the Red Zone face. They can accept one of the Government's two offers of compensation at 2007-values. Or, in nine months time, they can face the high probability that the Government will force them to sell at the present value of a quake-ravaged piece of land on which no-one may build in the midst of a sea of demolished houses.

    (I think that's double-fucked if you don't).

    Since Nov 2006 • 6221 posts Report Reply

  • Yip Yip, in reply to Bart Janssen,

    So if your house in the red zone burned to the ground you’d get full replacement?

    Seem’s to me fires in earthquake damaged homes would be fairly frequent.

    Interestingly, that happened in the 1906 San Francisco earthquake. Most insurance policies at the time specifically excluded cover for earthquakes. So, because there were so many fires anyway, some home owners were setting fire to their own properties so they could claim insurance.

    Christchurch • Since Jun 2011 • 6 posts Report Reply

  • Ross Mason,

    Surely what I read has to be based on the GV???

    I looked up CCC Valuation system where it clearly states that the rating valuation is also known as the capital value.

    The Council rates are allocated to properties substantially on the basis of capital values.

    Under both the Rating Valuations Act 1998 and the Local Government (Rating) Act 2002, the Christchurch City Council is required to value all properties for rating purposes.

    The Council has engaged professional, independent valuers to determine capital values. This ensures an appropriate separation between value setting and rating policies. Our valuer is GEM Valuation and can be contacted on phone (03) 365 6720 .

    A rating valuation (also known as Capital Value) reflects the property's market value at the date of the valuation. Does not include chattels ( e.g. carpets, drapes, light fittings), stock, crops, machinery or trees. This is then broken down to land value and improvement value.

    The value of the land is defined as the probable price that would be paid for the bare land. This includes any development work that may have been carried out (e.g. drainage, excavation, filling, retaining walls, clearing of vegetation).

    The value of improvements is calculated by subtracting the land value from the capital value, and represents the extra value the buildings and other developments give to the land. For a residential property this figure would generally represent the value of the house, garage and any site development.

    It looks pretty clear, But I have to ask David what is this "book value" you are talking about???

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

  • webweaver, in reply to Yip Yip,

    This was a government decision which is not an insurable event.

    Yeah, but it was a government decision made as a direct result of an event that caused “accidental and sudden loss of or damage to your home” – which jolly well is covered by insurance policies.

    It’s not like the govt’s planning to build a motorway through the red zone, which I agree would be different (though equally distressing).

    Weasel weasel weasel. Insurance companies should (I use that word advisedly) exist primarily to pay OUT in case of a disaster or accident – balancing the money we’ve all been paying IN all these years. They shouldn’t (word also used advisedly) be there primarily to please their shareholders.

    And as for other customers they’re supposedly looking out for – I’m one of those customers and I live in Wellington. In addition to praying that we don’t get The Big One, I would be a hell of a lot happier if I knew that if it does come and I survive, that I will be able to rely on my insurance company to pay out on my claim in full. It seems that after today’s news this is indeed a faint hope.

    Wellington • Since Nov 2006 • 330 posts Report Reply

  • Yip Yip, in reply to Sacha,

    This was a government decision.

    Exactly

    And my point is that insurance companies do not insure for government decisions.

    Christchurch • Since Jun 2011 • 6 posts Report Reply

  • Yip Yip, in reply to webweaver,

    They shouldn’t (word also used advisedly) be there primarily to please their shareholders.

    I agree. And they're not. The reinsurers have a far larger say than the shareholders. I don't think people understand how much influence reinsurers have. Insurance companies are obliged to work within their contract with the policy holder. It is not a choice.

    Christchurch • Since Jun 2011 • 6 posts Report Reply

  • Sacha, in reply to Yip Yip,

    And my point is that insurance companies do not insure for government decisions.

    Agreed. So homeowners should complain to the organisation who brokered the overall deal with the industry on their behalf. And that's not their insurance company.

    Ak • Since May 2008 • 16838 posts Report Reply

  • chris,

    That's just fucked David, really pissed off to read about this. Whoever wrangled this piss poor sorry excuse for a solution should set about remedying their oversight quick smart.

    中国 • Since Jan 2010 • 900 posts Report Reply

  • Tamsin6, in reply to Yip Yip,

    Excuse me while my heart bleeds for the insurance industry held to ransom by the evil reinsurers. Meanwhile, in other news, Fitch are saying that Australian non-life insurers with exposure to NZ will be ok with balance sheets "well protected through the maintenance of reinsurance covers and the New Zealand Earthquake Commission" - and don't worry little insurance companies because "Moreover, Fitch believes the Australian majors will seek to ultimately pass on higher reinsurance costs through via premium rate increases."

    Yippee for the insurance industry and the "well-capitalized" global reinsurance industry and hard luck for all you policy holders.

    http://www.reuters.com/article/2011/06/20/markets-ratings-christchurch-earthquake-idUSL3E7HK03020110620

    Nope, I guess we don't understand the insurance industry at all.

    London • Since Dec 2007 • 123 posts Report Reply

  • jb,

    There are 2 possibilities:
    The Government and the insurers made a "same-greasy-old-number" deal to ensure precisely this outcome or they were negligent in defining the use cases that they surely would have formulated to address all possible victim permutations.

    Both are realistic, neither palatable.

    Back to the drawing board and tweak it a bit before the courts get active.

    a.small.town.in.germany • Since Jan 2007 • 77 posts Report Reply

  • Tamsin6,

    Oh, and also from S&P (via Morningstar)

    http://www.morningstar.co.uk/uk/markets/newsfeeditem.aspx?id=148573656205739

    New Zealand has historically had favourable reinsurance pricing compared with
    other regions globally, partly as a result of relatively benign climatic and
    natural disaster conditions in years prior to the Christchurch event. Indeed,
    some primary insurers would have benefited from discounts for loss-free
    records, which now will not be available. New Zealand rate increases have and
    will be substantial, especially at lower reinsurance layers, and for insurers
    biased to South Island, Christchurch, and Wellington risks. To recoup some of
    the reinsurance price increases, major insurers have already put through
    significant price increases of the order of 20% for property-related cover,
    with no material loss of customers.

    London • Since Dec 2007 • 123 posts Report Reply

  • stephen walker,

    ok, so apparently, the policies do not cover govt-ordered demolitions. righto. why can the policy not be used to repair the house fully on site, after which the the owner pays for it to be removed to another site prior to govt demolition deadline?

    nagano • Since Nov 2006 • 635 posts Report Reply

  • Jeanette King,

    Can't sleep David ... hope you are managing better than me! I guess the way ahead for you at the moment is to:
    (a) see if the govt will accept a higher valuation than the 2007 GV/RV, something nearer to the price you actually paid,
    (b) get the Tower assessors back out to see if they will write off the house (though there's no incentive for them to re-evaluate your house as unable to be repaired). Maybe commission an independent assessment to say that the house is a write-off? I mean, can it really be economically repaired - those gaps between the walls and floors, etc ...

    As mentioned in previous posts this is a carrot and stick approach. Option A is the carrot, and the unmentioned Option C (compulsory purchase by Govt at today's prices) is the stick. I imagine that if you are an uninsured property owner with a munted house you would want to be in the Red Zone so you would at least get some payout. For those in the Red Zone with replacement insurance you'd want to have a munted house. Those with indemnity only insurance will take Option A. I imagine that many of those caught in the middle, like David, may just take Option A because it's quicker, simpler and less hassle. I think that this is the essence of the govt "deal" with the insurers - it's to give the insurance companies less grief as most homeowners will take Option A as trying to pursue option B if you don't have a completely wrecked house, will be very difficult and time consuming.

    By the way David, if the cost to repair your house is higher than the GV/RV of the house itself would the insurers pay that to you as cash or do they stipulate that that payment actually has to be spent on fixing the house up?

    On a completely different note, any predictions on whether the compulsory acquisition of property will be used on business owners in the CBD?

    Finally, there does not seem to have been any mention of all this in the mainstream media - the Press will hit my front lawn at 5am so will be interested to see ... actually just heard it arrive now (4.52am).

    Edgeware • Since Oct 2010 • 29 posts Report Reply

  • Jeanette King,

    You are referred to in dispatches David (though not by name):

    Some Christchurch homeowners were yesterday shocked to discover that the red-zoning of their properties would not entitle them to claim the replacement cost of their house from their insurer.

    One disappointed Tower policyholder reported in a blog that Tower had said it would cover only the cost of repairing the damage to his house, even though he had full replacement cover and his house was in a red zone.

    Tower group managing director Rob Flannagan confirmed yesterday that for red-zoned houses that were deemed repairable the firm would pay only for the cost of repairs, not the replacement cost of the house.

    And, generally speaking, if the house was undamaged, even though the area was a red zone, there was no claim under the insurance policy, Flannagan said – although it would depend on the individual policy.

    “That’ll be the same with all insurers, I suspect,” Flannagan said.

    “That’s why there are the two options Government has given."

    http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/5192061/Insurance-shock-for-some-residents

    Edgeware • Since Oct 2010 • 29 posts Report Reply

  • David Haywood, in reply to Jeanette King,

    (a) see if the govt will accept a higher valuation than the 2007 GV/RV, something nearer to the price you actually paid,
    (b) get the Tower assessors back out to see if they will write off the house (though there’s no incentive for them to re-evaluate your house as unable to be repaired). Maybe commission an independent assessment to say that the house is a write-off? I mean, can it really be economically repaired – those gaps between the walls and floors, etc …

    Thanks for your thoughts and suggestions, Jeanette. I am indeed following up both these courses of action.

    Dunsandel • Since Nov 2006 • 992 posts Report Reply

  • David Haywood, in reply to Ross Mason,

    It looks pretty clear, But I have to ask David what is this “book value” you are talking about???

    I was using book value as a generic descriptor to cover the various values that various organizations may assign to a property on their financial records (or ‘books’). For example:

    (a) The rateable value – based on a tweaked averaging process over a defined area (despite the passages you quoted above the council do NOT visit and evaluate individual houses. They estimate this figure on the basis that I have already described).

    (b) The value assigned by a registered valuer – this is supposed to be reflective of true market value, and DOES involve the inspection of the individual house and comparison with recent sales of similar properties. This, as I have already explained, may differ from the rateable value by more than $100,000.

    (c) The value assigned by an insurance company – this depends on the policy. In our case it seems to be the point where the repairs cost more than the replacement value. This may wildly differ from the previous values in (a) and (b).

    Luckily, I seem to have had more success in explaining this to my local MPs than you (again, I apologize that I am not the world’s best communicator – I acknowledge this as a major failing on my part). They have taken it up with CERA and apparently they understand the issue and are thinking of ways to deal with it fairly.

    As I said before, the main point of this post was to point out that "total replacement" policies are not being honoured by Tower Insurance in the way that their customers would have expected.

    Dunsandel • Since Nov 2006 • 992 posts Report Reply

  • Danielle, in reply to Yip Yip,

    It is not the company trying to weasel their way out of paying you.

    Just how delicious *was* that Kool-Aid, anyway?

    Charo World. Cuchi-cuchi!… • Since Nov 2006 • 3663 posts Report Reply

  • Ross Mason, in reply to David Haywood,

    (b) The value assigned by a registered valuer -- this is supposed to be reflective of true market value, and DOES involve the inspection of the individual house and comparison with recent sales of similar properties. This, as I have already explained, may differ from the rateable value by more than $100,000.

    The rock and swamp. So, take my "estimated" RV that we will charge you these rates, or, go get your own, we will accept it, but now we will charge you higher rates.

    You can guess which way most people went with that one. Earthquake?? What impending earthquake? I have a reply to an email from a contact deep in the insurance industry coming shortly...hopefully...

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

  • Ross Mason,

    I am pretty sure that in Upper Hutt, you can get your property revalued but if it goes up in assessed value the rates go up.

    Edite: No David, communication was good. I was unclear on the terms used and what they actually meant. I had a look at a few Avonside Drive rateable values on CCC and then tried checking out Quotable NZ to see if they were the same. I didn't find the QV numbers as they wanted money. So if anyone does have that info for their own property they can check to see if the two values agree.

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

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