'F' grade unfair - insurers' council

Insurance Council chief executive Tim Grafton has hit back at a reader's letter to The Press which graded large insurers' response to the Canterbury earthquakes as an "F".

Letter writer Dave Kelly said large insurance companies' "self-serving delays", and " ‘repair in the red zone' " offers were "amoral capitalism at its most naked".

Perhaps empathy was missing because their head offices were overseas, Kelly suggested.

Grafton said there was no loss of empathy. Hundreds of insurance companies' staff were in the same predicament as other Cantabrians, he said.

He denied any financial benefit for insurers in withholding payments to policyholders.

Delays meant inflation and increased building costs due to the demand for labour and materials. That cost outweighed any gain that could come from withholding funds and gaining interest from investment, he said.

He rejected the contention that drawn-out claims processes were wearing claimants down to the point they accepted a lower cash settlement.

Insurers had every motivation to settle quickly, but the process was complicated by the dual insurance model of EQC and private insurers, multiple seismic events, and the re-assessment each quake necessitated.

If policyholders were frustrated by those delays and opted for a cash settlement, that would be governed by their policy. A standard policy usually stipulated that an upfront cash settlement would be for indemnity value, not full replacement value.

Insurance companies had to comply with their policy, he said.

"It's a legal contract, they can't play willy-nilly around them . . . because they have to be audited.

"The reinsurance companies that provide them with a lot of the money that backs up those policies will require those policies to be adhered to. So it's not as if there is a manipulative process in place here."

More than half the commercial claims in Canterbury had been settled, which Grafton considers a "success story".

However, anecdotally, some business owners have reluctantly settled for a lower payout because they had neither time nor energy to battle through claims processes and needed to concentrate on running their businesses.

Grafton said it was ultimately a commercial decision each business owner would make.

"But insurance companies equally have to comply with the policy contract and that may well be an unfortunate outcome that they haven't been able to get full replacement because the policy just doesn't allow for that."

Grafton expected a "steep rise" in residential rebuilds this year to meet the "ambitious" 2015 year-end deadlines for completion of repairs and rebuilds several insurers have set.

Fewer than 10,000 houses were built in the whole country over the past 12 months and many more than that were needed in Christchurch alone.

Asked if the deadline was too ambitious, he said insurance companies had to set the bar high.

"People have high expectations and insurance companies really do want to have those expectations met in terms of meeting those deadlines."