Auditors Raise Concerns About “Funding Deficiency”

“Looks nice but just another smoke and mirrors report from the Natural Hazards Commission”.

That from Christchurch earthquake claimant and former city councillor, Ali Jones, after reading the 2023-2024 Annual Report from NHC (formerly EQC). She has been working alongside claimants for more than a decade.

Jones says the organisation is not being transparent, and the significant delays claimants are experiencing is not getting the attention it should.

“There are many examples of NHC is not being transparent. Combining claims handling costs/expenses (CHEs) and settlement figures is one[1]. An OIA shows that EQC/NHC paid $1m more for external legal advice in this last financial year than the one before[2] and we don’t know what internal legal advice is costing. There is no doubt the organisation has become far more litigious in the last 3-4 years which is a key pillar in the way many insurers play this game – delay, deny, defend. It’s terribly disappointing,” she says.

Every week Jones says she is contacted by homeowners, builders, engineers and others working on 2010 or 2011 earthquake claims, frustrated by what appears to be a return to the EQC of old.

“The communication delays, inconsistent and incorrect knowledge amongst some staff, not listening to claimants and challenging claimants’ experts with uninformed and unqualified responses – it’s unfortunately happening again,” she says.

Another behaviour of old according to Jones, is ensuring they control the process as much as possible when the homeowner should be leading. Homeowners have been using the New Zealand Claims Resolution Service (NZCRS) when they needed to resolve EQC/NHC matters independently however that has now changed putting NHC/EQC more in control

“They have set up their own disputes resolution service which they didn’t need to do, and which costs the taxpayer. EQC has consistently argued they had to set it up because of legislation but this is nonsense.[3] The NHI Act 2023 (Subpart 7) clearly states that “if there is no approved dispute resolution scheme, the Commission must establish and operate a scheme…”. They had even expressed support for the schemes that were well established and supported by independent experts.[4] Now if the dispute isn’t resolved, there is no right of appeal or independent determination; EQC/NHC says, take us to court.” (see diagram)

As she has raised in the past, Jones says EQC/NHC is continuing to close claims in order to meet KPIs, so the stats look better than they are[5].

“People are receiving emails from EQC telling them their claim is closed when there’s been no discussion or agreement with the homeowner. When contacted by the homeowner, if EQC decides to, the claim is reopened and is counted as open, from that day, further creating the incorrect perception that there are no “old or aged” claims. This goes against their much-promoted value of transparency.

Ali Jones says there is no doubt that claimants across both the On Sold programme and the Canterbury EQ claims generally, are experiencing slow communication from NHC, confused and inconsistent decisions and a return to the poor processes we saw 4-5 years ago,” she says.

There’s a big discrepancy between customer satisfaction levels and EQC/NHC narrative (for recent events). Has EQC/NHC's quality system identified this disparity and what practical measures have NHC put in place to remedy this. What if EQC/NHCs view about claimants not completely understanding the limits to cover is only part of the reason?

“The On-Sold Programme, when operating correctly, is an example of how to do insurance well,” she says. “There were things that could have been improved but there always are. Now the editing of what were agreed lists of damage or failed repairs (one recent claimants had $200,000 of agreed repairs removed from a scope of works when a new claims manager took over the claim), doubling down on trade rates that are incorrect and woefully light (painting for example) and using unqualified staff to dismiss earthquake damage that the homeowners qualified and experienced expert has proven to be earthquake damage - these are only three examples of what is delaying people getting their homes repaired. It’s giving some no choice but to go to court which is not only a breach of one of the On Sold objectives issued by Treasury[6], but it again highlights the power imbalance. Who can afford court? Well, EQC can, looking at their legal costs,” she says.

“EQC/NHC is clearly under pressure with the massive financial liability its carrying, both with its On Sold programme and Canterbury EQ claims. In fact the auditor highlights the issue in the recently released Annual Report[7] where EY states “As at June 30 2024, the Commission’s total liabilities exceeded its total assets after accounting for reinsurance.” To answer the question a number of politicians and senior Commission staff have asked over the last few years “how do we turn the Canterbury EQ tap off?”, follow the correct process, using independent expert information informed by a correct engagement brief, respond in a timely manner and listen to the homeowner’” she says.

Jones says increasingly a number of people at NHC/EQC are like the penguins from Madagascar, just smile and wave boys……

[1] Pge 79, NHC Annual Report 2023-2024

[2] OIA EQC/NHC reference: OIA24-25 481

[3] https://www.rnz.co.nz/news/national/508998/earthquake-commission-pushes-to-make-dispute-resolution-process-easier

[4] https://www.nzcrs.govt.nz/assets/documents/Homeowners-Advisory-Group/gccrs-homeowners-advisory-group-meeting-minutes-30-september-2021.pdf

[5] https://www.insurancebusinessmag.com/nz/news/claims/eqc-toka-tu-ake-chief-responds-to-massaging-figures-allegation-483015.aspx

[6] Pg 13, Treasury Document 2019 https://www.treasury.govt.nz/sites/default/files/2019-11/ocp-4190360.pdf

[7] Pg 73 NHC Annual Report 2023-2023 “Deficiency Funding between the Crown and the Commission”

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