Nine out of 10 businesses may be ineligible for quake relief
Quake-hit Wellington businesses are caught between a rock and a hard place, ineligible for Government relief, and squeezed by their insurers, a senior business adviser has warned.
Deloitte private partner Mike Curtis believes the qualifying criteria for the Government relief scheme announced on Monday will exclude as many as 90 per cent of affected businesses.
Only those without continuation insurance, also known as loss of profits or business interruption insurance, are eligible.
But many insurers have imposed hefty excess provisions, making it too expensive for some businesses to claim on that insurance.
"Since the Christchurch earthquake, most insurance companies imposed an excess on claims generally 5 or 10 per cent of the sum insured," Curtis said.
"An example is a business with turnover of $1m and gross profits of $600,000, the excess at 10 per cent would be $60,000."
He is calling on the Government to relax the eligibility criteria. "It would clearly be fairer to businesses who have been prudent in taking insurance in the first place."
Restauranteur Matt McLaughlin, who owns several Wellington venues including Four Kings sports bar and Five Stags restaurant, had already been stung by excess provisions.
"I'm covered for $800,000 of replacement stock, but the excess is 5 per cent of what I'm covered for.
"Unless the whole place falls down, it's probably not worth payment on it."
First Retail Group managing director Chris Wilkinson said businesses were also being caught out by stand-down periods ranging from two to three weeks, during which they could not claim insurance.
"The relief is actually incredibly limited, and this is a big challenge for many of the businesses," he said.
Insurance Council chief executive Tim Grafton said an excess of 5 to 10 per cent of the sum insured, together with a stand-down period after an event such as a quake, helped keep premiums affordable.
BACKSTOP FOR BUSINESS
Economic Development Minister Steven Joyce said he expect many Wellington businesses would have business continuity insurance, and it was appropriate that this was the first port of call.
"That is also the case for businesses in Kaikoura."
He said the business support package's role was to provide a backstop to businesses who found their insurance unable to support them, enabling them to retain employees.
"It's not possible for the Government to meet all the costs and loss of turnover businesses experience, and I'm confident most businesses understand that."
CLAIM CAPPED AT 10pc
The owners of Green Land cafe, whose premises in the Ministry for the Environment building were closed over structural concerns, said they were shocked to find their insurance payout would be capped at 10 per cent of their total policy because the loss resulted from an earthquake.
Mike Pullin and Glenn Pitcaithly's initial application for a $200,000 payout was reduced to roughly $20,000.
"You take business interruption insurance out for the very reason that you think you'll be covered in the event of a disaster, which is what we've had," Pullin said.
"Then to find out it has to be triggered by a material damage claim first, then there's a $5000 excess, then there's a 21-day stand-down period, and then you're only covered for 10 per cent anyway ... It's all a bit disappointing would be a mild way of putting it."
The Insurance Council said business owners had to sign off their policies, and advised them to read them thoroughly to check for earthquake-specific conditions.
Council chief executive Tim Grafton said: "There are a variety of business interruption policies on the market, and a good broker should negotiate on behalf of their client to obtain the best and most appropriate policy."