Land claims – just how complex are they?

Land claims – just how complex are they?

Land claims – just how complex are they? | Insurance Business New Zealand


Land claims – just how complex are they?

Claims expert sheds light on intricate process


Terry Gangcuangco

There has not been a shortage of claims-related complaints in New Zealand following the double whammy of the Auckland Anniversary floods and Cyclone Gabrielle – from ombudsman schemes seeing increases in complaints numbers, to opposition politicians calling for a more expeditious process.

At the centre of the massive claims undertaking are land claims, which fall under Toka Tū Ake EQC’s EQCover but are processed end to end by partner insurers – along with the property claims for the losses they cover under their policies – as part of the insurer response model (IRM).

Compared to buildings or contents insurance claims, claims for land damage take longer to finalise because of their complexity. But just how complex are these claims? Insurance Business sat down with Gallagher Bassett New Zealand’s Toka Tū Ake EQC relationship manager Todd Niccol (pictured above) to paint a picture of the process.

Land claims – from lodgement to settlement

According to Niccol, who worked for more than a decade at Toka Tū Ake EQC before moving to the claims and risk management provider, a straightforward land claim could take about three months to be completed; a more complex one, “far longer”.

These EQCover claims end with a cash settlement and have no links to repairs associated with the insured property. Aside from third-party administrator Gallagher Bassett, also involved in the process are experts including geotechnical engineers and land valuers.

Niccol noted: “On a basic land claim – let’s say you’ve had a landslip at the back of your property and you’ve got some inundated land – the process is you lodge the claim, it gets allocated to an assessor, we go out, and we assess the damage and explain the process to the customer at that stage. If it is a valid claim and does need some engineering, then that goes to a geotech engineer.

“They pick up the claim, they go to site, they do an inspection and provide us, the assessor, with a report on: one, what the damage is; two, what’s the imminent risk of further damage as a direct result of the event. ‘Imminent risk’ means, if we left that slip how it was for a 12-month period under normal weather conditions, what else could occur, how worsened the damage would be, and what damage would occur to any other land, etc.”

Essentially, the engineer quantifies the areas of land damage and those of imminent risk, coming up with a remedial solution to fix the land and prevent the imminent risk from occurring.

“Once we get that engineer’s report back to us, we do a full review on it and make sure it falls within the Earthquake Commission Act 1993,” Niccol said. “Then, at that stage, it goes to one of our estimators, who is normally a qualified builder or an LBP (licensed building practitioner) builder, who then costs up the remedial solution that the engineer’s laid down in his report.

“In conjunction with that, we also send it off to a registered land valuer. The land valuer puts a value to the specific areas of damaged land around the property. Ninety per cent (90%) of the time, that would involve a site inspection by the valuer. Sometimes, depending on how badly damaged the property is, our estimator may need to go back to site, but normally the estimator is the assessor that attended in the first instance and should have enough information to be able to cost it.”

What follows, according to Niccol, is a “hurry up and wait” scenario for the valuer’s part of the cycle. The EQCover claim can only be settled once the value of the damaged land is identified, as well as the cost of the remedial solution cited above.

Niccol explained: “How the Earthquake Commission Act works is we look at how much it’s going to cost to fix it against the value of the land that’s been damaged, and we pay the lesser of the two sums. How I explain that to customers is, if it’s going to cost them $10 to fix it but the value of the land that’s been damaged in the land at imminent risk comes at $7, you’ll get the $7 in way of a cash settlement.

“That’s where laying down how EQC settles claims right off the bat really helps the customer to understand. Because people think they’ve got insurance and so they think that they’re fully covered, but the Act doesn’t actually work that way. It has worked that way a little bit in Auckland, just because their land values are higher than other places in the country… But in other circumstances, you can have a $20 fix but the land value on a steep south-facing slope is worth $2, so you’re going to get $2 to carry out a $20 repair.”

As highlighted, EQCover claims are not involved in the actual repairs, which in certain cases won’t be feasible due to what is deemed unmitigable risk as identified by the government’s categorisation.

Further complexities

Adding to the complex nature of land claims are shared land and shared structures.

“With the IRM, when you get a shared land claim, when you’ve got a cross-lease property and you’ve got four houses on this cross-lease property, each house is with a different insurer,” Niccol told Insurance Business. “That’s where the complexity comes in. If you’ve got four different insurers, they’ve got four different assessors walking up the driveway.

“When it was EQC, it would be the one assessor would walk up the driveway, regardless who the insurer was, and he would have dealt with all four clients and he would have got one engineer to do all the engineer’s reports, and then we could settle the claim.

“Shared land claim – the cross-lease property, four different houses, four different insurers, but one plot of land – that’s complex enough. And then you’ve got two houses that are separate but next-door neighbours – two different insurers, they’ve got a boundary retaining wall, and you’ve had a cross-boundary landslip. Again, you’ve got two different insurers but you’ve got some shared structures in the middle being that shared retaining wall.”

When the IRM was introduced in 2021, the goal was for claimants to have a single point of contact, that being the private insurer, instead of them having to deal with the Crown entity as well.

Meanwhile, the quick succession of this year’s weather events has naturally made things even more difficult from a claims perspective.

Niccol said: “With Gabrielle and the Anniversary weekend, one event is alright, but when you have two or three events within the one period, then you’ve got the [question of], ‘What happened from that period? What happened from that event? What happened from this event?’ It’s one claim per event. If they’ve had multiple events, it could be multiple claims.

“So, there’s a complexity in that also, but we just try and plan the best we can. What I always say is, we’re one day closer to the next event… All you can do is look at your readiness plan, then try and put everything in place so you’ve got a plan when it does happen.”

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