EQC 'proud of achievements in Canterbury'
Vero, New Zealand's second-largest insurer, has questioned whether the Earthquake Commission should continue to manage claims following a major disaster. EQC chief executive Ian Simpson says, however, that his organisation is proud of its achievements in Canterbury.
When one of New Zealand's largest private insurers publicly questions whether it is sensible to operate a fully resourced and funded public insurance agency to manage claims after a big natural disaster, you might reasonably expect the people of Christchurch to prick up their ears.
The logic of removing the Earthquake Commission (EQC) is that the Government would still need to partly insure and fund its citizens for disaster insurance, but private insurers alone would run claims management.
Cantabrians, along with the majority of taxpaying New Zealanders, will surely be encouraged by calls for every effort to be made to ensure money is not needlessly wasted by a hybrid earthquake-management model that duplicates costs and escalates claims handling expenses, delays and uncertainty.
If a balanced budget and debt reduction are considered worthy goals, who then can argue with logic that reform of EQC is desirable if needless waste and duplication are to be eradicated for the good of all?
As chief executive of EQC, I welcome and encourage discussion and debate about our future role. But it is not my intention here to reason the merits or otherwise of calls for change to EQC.
Treasury currently leads a review of the Earthquake Commission Act which will determine our future. Instead, I want to talk about the legacy that EQC, in its current form, is leaving in Christchurch.
The Canterbury earthquakes triggered enormous and fundamental changes to both EQC's size and role and have demanded constant review of the way in which the organisation operates. On September 3, 2010, we had 22 staff geared to cash settle insurance claims for natural-hazard disasters.
EQC's largest event before then was 43 years ago where it paid out on 10,500 claims from the 1968 Inangahua earthquake. EQC's role then never contemplated managing repairs to people's wrecked homes.
Just over four decades on, the scale of devastation to Canterbury and the realisation of the importance of rebuilding one of New Zealand's most important economic regions required EQC to adopt a completely different approach to simply cash settling insurance claims.
So what has Canterbury meant for the EQC? Very recently, several leading insurance industry observers reflected that EQC was given an impossible role, and that considering the severity and scope of the Canterbury disaster, hasn't done that badly.
While the people of Canterbury are arguably better placed to decide, a few facts are instructive.
In an incredibly short timeframe EQC has upsized, employing either directly or indirectly 20,000 people, an incredible effort for any organisation. We took on Fletcher Construction to project manage structural repairs under $100,000 and to carry out urgent works and run the Winter Heat Programme.
We've had to prioritise our vast workload. We bought our call centre in-house and have nearly completed doing the same with our claims processing centre. We've implemented improvements to the process of re-inspection of homes with insurers and we've simplified the process of opting out of the Canterbury Home Repair Programme for customers who have the skills to manage their own repairs.
We've instigated a groundbreaking land project, the largest land damage assessment and mapping exercise undertaken anywhere in the world. It gives us a comprehensive picture of the earthquakes' impact on the land under Canterbury.
We'll share this knowledge with the rest of New Zealand where other regions and main centres can plan and strengthen buildings, and understand the character of the land beneath them much better than before.
In addition to area-wide land assessments within Canterbury's Green Zone TC3 EQC has undertaken an extensive drilling programme to provide the data necessary to identify the most suitable foundation design for homes in the area.
All the while EQC has maintained its public-education programmes which encourage people to take steps to prevent natural disaster damage to their homes.
We've maintained our investment in the GeoNet monitoring system that's benefited scientists and the public alike. The information collected is available free on the geonet.org.nz website, and since the Canterbury earthquakes the site has received about 15,000 hits per second in the moments after a major aftershock.
These massive and rapid changes to EQC have not been without issue. We've had to constantly change and adapt, refining our processes and procedures to maximise better outcomes for the people we serve.
Many of our resulting actions have prompted criticism. Some of it is deserved. We've made mistakes along the way and we've had to learn hard lessons, but EQC is proud of its achievements as it helps rebuild the South Island's most important economic hub city in partnership with other government and private sector agencies.
When EQC completes its work in Canterbury around 2015, the aim is to have left a positive and lasting legacy. What shape will it take? Foremost is the legacy of good-quality housing stock, homes that are warm, secure and weatherproof. EQC will be remembered for championing programmes that ensured that the enormous sums of money flowing into Canterbury for repairs remained in Canterbury and were used for purpose. EQC does not want to see people or capital flight from a region that contributes a significant proportion to New Zealand's gross domestic product output.
While New Zealand has high rates of insurance cover by world standards, since the Canterbury quakes Kiwis have come to better understand the value of insurance and how it underpins most economic activity.
Without insurance homebuyers can't get mortgages, business can't operate and market failure becomes a real prospect. Our small economy means we must maintain the confidence of international reinsurers where most of our ability to pay out on disaster claims comes from.
The EQC's reinsurance programme is another of its legacies, bringing essential capital into New Zealand at a time when it's most needed and ensuring that reinsurers on the other side of the world have confidence in New Zealand's risk profile, a profile EQC works assiduously to maintain and keep transparent to them.
So the next time you see a call to change the EQC into something else it's wise to consider we've became that something else by ourselves because we've had to, that our lasting legacies demonstrate we are now known best for the things we weren't set up to do.