8 years since first Canterbury quake; Insurance still fiddling and farting

530,000 Cantabrians went to sleep on the night of 03-04 September 2010 thinking tomorrow would be just another day. Probably not a single person thought about the fault lines lurking underneath the alluvial gravel plains that Canterbury and Christchurch sit on. But many, many people will remember that freight train like rumble coming through the night, the frantic staggering to the doorway as the house began to shake.

When the shaking stopped about a minute later, it was immediately obvious a major earthquake had hit. The power was out, as was water and sewerage. A steady stream of aftershocks continued bolting through in the remaining hours of darkness and into the day, the days, the weeks and months.

Within days aftershocks of a human kind had started. Completely overwhelmed by the magnitude of the disaster that had befallen them, E.Q.C. had the rabbit in a headlight look – frozen, not knowing what to do and completely unable to assist customers. With every big aftershock a new claim would have to be lodged. With each one, new reports and inspections would be needed. New case managers would need to be assigned or reassigned.

Whilst there were initially 240,539 claims needing to be solved, of which 240,021 have been, 8 years of putting ones life on hold whilst waiting for a Government agency to get its act together is quite shocking. But that was the case of one lady in Christchurch on the consumer affairs programme Fair Go last night.

8 years, many more earthquakes later and it is now obvious that E.Q.C. actually DOES know what they are supposed to be doing. They just do not want to. For reasons only understood by their bureaucracy it is somehow not in their interests to wrap up the remaining several thousand Christchurch earthquake claims that should have been wrapped up by my guess not later than the start of 2015.

Imagine that.

Let us be honest. Earthquake Commission, and the major insurance companies have no intention whatsoever of finalizing the remaining claims and New Zealanders should stop deluding themselves into thinking otherwise.

90 days or see you in court, is what I say the Government should tell them. During that time they should prepare the necessary legal documents for the court, and on the 91st, these should be served.

There is no excuse for any of the on going delays. There is only so many times a report can be written without covering material covered in previous reports. There is only so many times an inspection can be done before the inspectors see that they are looking at things they have already sighted. There is only so many times anyone trying to get to the bottom of this should ever have to put up with bureaucracy before they have a case to make against the officials in question.

That time has long since come for E.Q.C. and the insurance companies.

Earthquake Commission needs bailing out

The coffers of the New Zealand Earthquake Commission are bare. After shelling out billions for the Canterbury earthquake 2010, the Christchurch earthquake (technically an aftershock of the former)in 2011 and the Waiau earthquake of 2016, the bank accounts of the Earthquake Commission are in need of Government bail out.

No one should be surprised at this. Prior to the earthquakes of this decade the Earthquake Commission at one point managed nearly N.Z.$6 billion in assets. The combined costs of the three events is around N.Z.$46 billion (around $4 billion for the Canterbury earthquake; $40 billion for Christchurch earthquake and $2 billion for the Kaikoura earthquake and aftershocks).

However, it is not an acceptable state of affairs in a country as prone to earthquakes as New Zealand is that our main earthquake insurance provider should be without any funds. It also raises questions about how we fund the Earthquake Commission and how we expect it to dispense insurance in the future.

It needs to be remembered that E.Q.C. insurance is capped at N.Z.$100,000 and whatever is in excess of that is the responsibility of the claimants regular insurance company (State, New Zealand Insurance, A.A., and so forth). It is not geared to supporting businesses and only supports domestic assets.

In order to reduce the E.Q.C.’s own exposure it takes out insurance with large reinsurance companies. An example given is the $2.5 billion taken out with 30 reinsurance companies.

Still, the large earthquakes of the last several years have raised a concerning question. How will E.Q.C. cope if further earthquakes occur in the Christchurch or Kaikoura tectonic settings? Such concerns are real because the Hope Fault with a repose period of 120-150 years has not ruptured for 129 years, and typically ruptures in magnitude 7.0-7.3 earthquakes – it branches off the Alpine Fault and goes out to sea just north of Kaikoura. The Greendale Fault, which started the Christchurch earthquake sequence, only partially ruptured on 04 September 2010. Whilst there is no suggestion it is going to rupture in the immediate future, at some point the segment that has not, has to reconcile with the rest of the fault – that will probably be another magnitude 7.0 earthquake.

A Crown Guarantee ensures that should an earthquake breach the $1.5 billion excess cap, the Natural Disaster Fund pays out until its limit is met and then the Crown pays the remainder. All very well, but when the Crown has already forked out for multiple large events that have nearly completely drained E.Q.C., one should consider whether the Crown needs some sort of back up. I do not know how this might happen or if a backer is even possible, but still it is worthwhile considering this possibility.

Time for E.Q.C. inquiry

During the campaign, Prime Minister-designate Jacinda Ardern and Labour made a slew of promises regarding the Christchurch earthquake recovery and the role of the lead agencies involved. Whilst the Canterbury Earthquake Authority has since been dismantled, the Earthquake Commission, the other major Government agency involved – overwhelmed and somewhat leaderless since 2010 – has fought a losing battle coping with the complexity of the civilian rebuild.

The incoming Minister for Christchurch Earthquake Recovery, Megan Woods, has stated her desire to hold a Royal Commission of Inquiry into the failure of the Earthquake Commission. The Commission which has oversight for the repairs to properties damaged in the 2010-11 earthquake sequence told media that she “absolutely wants one to be held.

This is long overdue. It should not have taken a change of Government in Wellington to bring about something that many have been demanding for several years. Despite having largely finished the settling of civilian claims, the Earthquake Commission has since been found significantly wanting in signing off on repair work done. Many of the claimants have come back to their properties after work was supposed to have been completed to find defective repairs or in some cases work that was meant to be done, not being done at all.

When former Minister for Earthquake Recovery, Gerry Brownlee was appointed to the role in September 2010, following the initial magnitude 7.1 earthquake, the Earthquake Commission was swamped by claims from the quake which totalled N.Z.$4 billion. Only a fraction of those had been processed when the 22 February 2011 earthquake hit. The claims blew out to over 200,000 and totalled N.Z.$35 billion, rising to N.Z.$40 billion with the damaging 13 June 2011 aftershocks.

Although Mr Brownlee made significant effort to get the Canterbury Earthquake Recovery Authority and E.Q.C. working together, there were common problems – a lack of communication, unwanted Ministerial intervention, a lack of transparency in the organizations and accusations of nepotism. Unfortunately a degree of truth existed to all of these with the Chief Executives of both E.Q.C. and C.E.R.A. coming in for damning attention. To his credit, the C.E. of the Canterbury Earthquake Recovery Authority, Roger Sutton fell on his sword after realizing the damage his behaviour had done. Mr Sutton had gained respect in September 2010 for his outstanding leadership of Orion, the lines company responsible for the electricity power line network and distribution in Christchurch.

The Canterbury Earthquake Recovery Authority wound up on 18 April 2016, five years after forming. It had several successes such as overseeing the Christchurch recovery blueprint, but it also had negative events such as the premature demolition of several buildings with heritage classifications on them undermine the more positive work. Its failure to co-ordinate properly with E.Q.C. served to undermine the effective and efficient early stage recovery.Whether or not any Royal Commission of Inquiry seeks to uncover who did what is another story altogether. Let us hope it does, for the ability to find out how E.Q.C.’s involvement in Christchurch got to where it is, depends on this.

Earthquake Commission assessors should be qualified

The Earthquake Commission has been the target of sustained criticism over its handling of Canterbury and Christchurch earthquake claims sincee 0 September 2010. After each significant quake event (04 September 2010; 22 February 2011; 13 June 2011 and 23 December 2011), the E.Q.C. would open a 90 day window for claiming insurance on fresh damage cause the event/s of that particular day. After  At the start of 2012 there were 100,000 claims for damage still to be settled, though this should not be a surprise as strong aftershocks on 23 December 2012 opened up another set of claims.

The criticism against E.Q.C., despite attempts to address it, has unfortunately been largely justified. From the outset in 2010 it has struggled with the huge number of claims laid. The E.Q.C. was slow to admit that it was struggling until several weeks after the 2010 earthquake, when it said it had inadequate staffing levels, was inundated in paper work and could not cope with the number of callers ringing its hotlines each day for assistance. After the 22 February 2011 earthquake, despite the responsibility for many decisions having been taken of it by the now defunct Canterbury Earthquake Recovery Authority, the E.Q.C. was completely overwhelmed even with additional staff flown in from Wellington each week.

It is not just the lack of internal preparedness for responding to a major disaster that caught the E.Q.C. off guard. The actions and attitude of its staff have been pulled into the media spotlight numerous times because of poor judgement. Yes, they might be in a stressful job. Yes they are only humans who also make mistakes just like the rest of the human race. A failure for example after 5 1/2 years to understand that the elderly claimants need to be settled quickly so that they can get on with living the rest of their lives in peace. A more common problem is that ordering another report into something that is already known is just keeping a desk worker busy somewhere.

But in 2016, to hear after 5 1/2 years that the Earthquake Commission still does not have people who are properly qualified to carry out assessments and that it is not a priority is frankly criminal. To hear that there are people who are suffering from botched repairs that have been done two or three times because of this criminal negligence on E.Q.C.’s part, is not forgivable. The Earthquake Commission has had ample time to fix the problem. The Minister for Earthquake Recovery has had ample time to make E.Q.C. fix the problem. As a matter of priority the existing claims need to be dealt with fastest – before Christmas at the latest.

After that, the E.Q.C. needs a managerial clean out, a systems overhaul and some proper standards implemented. Anything less is deserving of the Chief Executive’s head.

Earthquake Commission woes in Christchurch

Nearly five years have passed since the ground shuddered on 22 February 2011, killing 185 people and causing billions of dollars in damage across Christchurch. In that time we have seen the insurance companies struggle under the weight of claims flooding their offices; with the processes established by the Canterbury Earthquake Recovery Authority and implemented by the insurance companies and E.Q.C. As we approach the anniversary, the senior leadership of E.Q.C. is once again defending its record.

Shortly after the 2014 elections a friend and I were chatting about the problems in Christchurch post earthquake and how to tackle them. One part of the discussion was what the individual political parties when they were on the campaign trail had proposed to do to fix Christchurch. It occurred to both of us that no one had seriously thought about giving the insurance companies and E.Q.C. a deadline to fix individual complaints by or the Government would see them in court. Nearly 18 months later, it seems like not a bad idea. However, it is unlikely to happen under a National-led Government and by the time an alternative Government is elected, for elderly people it might be too late and for others the will to continue fighting might have simply evaporated.

But even if E.Q.C. and the insurance companies were to be taken to court, several questions arise:

  • How long would a likely result take, as many people have had to put their lives on hold whilst they wait for the insurance companies and E.Q.C. to agree on an outcome
  • What would be the general grounds on which the case would be most likely to proceed
  • Does it become some  sort of class action to which anyone with a still outstanding claim is invited to join or a smaller action
  • How would the Government, E.Q.C. and the insurance companies react to such an action

To be honest, although insurance companies have come in for substantial – and most justified – criticism, it is perhaps E.Q.C. that has the most to answer for. The organization that was set up to provide and manage insurance for natural disasters was completely overwhelmed by the magnitude of individual claims and the sheer number that poured in as a result of the earthquakes. Upwards of 400,000 claims were lodged. There was barely a house in Christchurch that did not have damage of some sort. Four separate earthquake events over 15 months meant that E.Q.C. would often still be resolving a previous claim when claims for the next seismic event started to come in.

In some respects the organization is now functioning like a smart phone or android device that has partially frozen: commands are taking forever to transmit into actions, which are often confused and sometimes even cause things to happen for which no command was ever computed. But would a hard reset by dismissing the senior leadership work, or is it just going to cause more random failures? When only a quarter of the staff believe that their employer is doing what people want and that simply ignoring legal and engineering advice in particular cases is some how acceptable to management, perhaps something bit bigger than a hard reset is needed.