In recent years there have been a number of significant natural
disasters, most notably the Canterbury earthquakes, but also the
Seddon earthquakes and flooding and landslips in various regions
throughout the country. These events have put the spotlight on the
Earthquake Commission Act 1993 (EQC Act), and
shown some areas for improvement.
The Government has now released its proposals for the reform of
the EQC Act. The aim of the reforms is to streamline claims
processes, and ensure that the focus remains on insuring homes
against natural hazards.
The proposed amendments to the EQC Act include:
An end to cover for contents.
EQC currently provides up to $20,000 cover for damage to
contents. Leaving this cover to insurers will allow EQC to focus on
its core responsibility of providing cover for buildings.
Claims being lodged with the private insurer, rather
The insurer will do the initial work assessing and validating
the claim, and will then pass the claim forward to EQC. This should
resolve the issue that has occurred repeatedly in Christchurch,
where there is disagreement as to whether the claim is over or
Cover for buildings to extend to
This means that cover would encompass any work required on the
underlying land, including obtaining geotechnical assessments and
any levelling or filling of the land. EQC will also cover driveways
under this amendment. This will remove an overlap between house and
land cover provided by EQC, and will also better align EQC with the
practice of private insurers.
Increasing the cap on cover for houses from $100,000 to
This increase is to reflect the inclusion of siteworks in the
cover for buildings. It is also expected to lead to lower premiums
being charged by private insurers.
Land cover to apply only where it is impracticable to
Much of what is currently covered in respect of land would,
under these proposals, now be covered by the siteworks inclusion in
the building cover. This provides cover for the land where the
house is not rebuilt.
A standard excess of $2,000
The current excess is calculated as a percentage of the claim,
and so cannot be determined until the final cost of the claim is
known. Setting a fixed amount would provide clarity for homeowners.
However, this is a substantial increase on current excesses, which
range between $200 and $1,000.
The Government has also confirmed that since the purpose of the
EQC Act is to put a roof over people's heads after a disaster,
it will not cover commercially run accommodation such as hotels,
serviced apartments, boarding houses, nursing homes, or
campgrounds. It also will not extend cover to bare land, buildings
under construction, or non-residential property. The EQC Act will
cover private residences, including rental accommodation, holiday
homes for individual households, and retirement villages.
More information on the proposals, and a form to make
submissions, are available from the Treasury website,
here. Submissions are open until Friday 11 September 2015.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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