Today’s EQC report urges the country’s natural disaster insurer to prepare for the next “big one”. David Williams reports

The Canterbury earthquakes killed 185 people, and damaged 180,000 houses, some of which still haven’t been adequately repaired. Or re-repaired.

But they also did something else. They shook people’s confidence in the Government, broadly speaking, and the Earthquake Commission in particular.

Before September 2010, when the magnitude 7.1 Darfield quake hit, kicking off the years-long sequence of violent shakes and shudders, EQC was typically seen, warmly, as the Government-funded body that would step up in a natural disaster and help people recover.

But when the deadly February 2011 quake hit, it seemingly lost sight of its reason for being.

(Nature gave a little reminder this morning – a shallow 4.3 magnitude jolt centred 10km south-west of Christchurch.)

That’s something Dame Silvia Cartwright wants addressed.

This morning the former Governor-General releases her report into the post-quake shemozzle, recommending the Government make fundamental changes. They include amendments to the Earthquake Commission Act, to give EQC a formal purpose, a review of the crucial $150,000 “cap”, and demanding the Crown entity “invest adequately in its data technology”.

By its very nature, the inquiry is somewhat backward-looking.

It sets out how an ill-equipped and under-prepared EQC became overwhelmed by extra responsibilities lumped onto it by the Government. How it made unrealistic promises to the public, failed to properly oversee repairs, including confirming if they happened at all in some cases, and ran an “inappropriate and unprofessional in-house model”’ for resolving disputes.

The Commission is now seen by many as “uncaring, miserly and inefficient”.

Cartwright’s clear and empathetic report is awash with the suffering of Cantabrians, noting how people in poor health and financial stress were “palpably re-traumatised” by the post-quake chaos. (Claimants’ experiences, while subjective, “cannot be dismissed”, she writes.)

EQC publicly apologised for its failings late last year. And while the scope of her inquiry excludes apportioning blame, Cartwright says: “I have made clear in this report where I found fault with EQC or where I found its response to be below the expected standard.”

Arguably the report’s most important role, however, is to look forward, to a country at increasing risk from extreme climate-related events.

As droughts, floods, storms, and fire become more frequent, and a rising ocean eats away at the coastline, insurers may be more picky about which areas to insure. Given this isn’t just a problem for New Zealand, the solvency of some global reinsurers – on which EQC relies – may be tested.

Cartwright’s report shows how what was often dismissed as a Canterbury problem is, in fact, a very real issue for the rest of the country. It could be your area’s future problem, she suggests. And without changes, the lessons might be lost. Indeed, she raises doubts about EQC’s ability to make some changes.

But she underscores how lucky the country is to have a Government-backed natural disaster insurance scheme, that is unique in the world in its coverage. The thing is, people need to have confidence in EQC’s ability to offer that protection.

Cartwright notes a “palpable and increasing anxiety” about the ability to get and maintain insurance, and concerns about how EQC and other agencies – the whole country, basically – will cope when the next “big one” strikes. Given we live in the so-called Shaky Isles, the arrival of another major natural disaster is inevitable.

“Shortcomings in its performance resulted in unacceptable stress, distress and delays in some people’s recovery and repair of their homes.” Dame Silvia Cartwright’s report

EQC, established in 1945 as the Earthquake and War Damage Commission, provides public insurance cover, up to a “cap” and within certain limits, for natural disaster damage to residential properties that have private fire insurance. Today’s cap, increased last year, is $150,000 plus GST. If repairs cost more than that, private insurers step in. Contents insurance is now excluded.

That natural disaster could be many things, including earthquakes, land slips, or a volcanic eruption. For residential land, it could be a storm or flood.

The idea is because of that transferred risk, homeowners can put the money they might otherwise have set aside to repair damage caused by disasters to more “productive uses”.

When the Canterbury quakes hit, however, EQC wasn’t ready – albeit for what was, before Covid-19, the country’s biggest emergency since World War Two.

“Shortcomings in its performance resulted in unacceptable stress, distress and delays in some people’s recovery and repair of their homes,” Cartwright’s report says.

There were positives. For example, EQC’s collaboration with Crown research institute GNS Science, and with environmental consultancy Tonkin & Taylor, improving the response to, and understanding of, widespread land damage.

However, the Cartwright report paints a picture of a middling, muddling Crown entity, with so little relevance that it wasn’t given enough money to plan ahead or responsibility to manage its own affairs. Despite that lack of faith, the Government effectively ordered it to manage home repairs in Canterbury, with little support. Its work, sometimes poor, but done under trying circumstances, has to be acknowledged, Cartwright says.

The failures, however, were numerous. There were inadequate quality controls, poor staffing decisions, and uncoordinated repair planning. That was exacerbated by sub-standard data systems, and the adoption of an “inappropriate and unprofessional in-house model” for managing disputes.

“Unquestionably, there has been serious damage to EQC’s reputation; some deserved but much because it was simply unprepared for the role assigned to it,” the report says.

The integrity of the claims process, and the results, depend on thorough, consistent and accurate damage assessments, Cartwright writes. Time and again, problems in post-quake Canterbury came back to poor assessments, which led to disputes over the repair strategy and, sometimes, inadequate repairs.

“This cannot happen again,” the report says. “While the next disaster and the type and quantum of damage it will wreak remains largely unknown, EQC must have work underway now to ensure that roles are clearly defined and there are appropriate processes and protocols in place for identifying, assessing and documenting natural disaster damage–responsibilities that may fall again to EQC in a major natural disaster.”

It speaks volumes that Cartwright’s suggestions on claims management are so simple and obvious: be fair and balanced, ensure assessors are properly trained and have appropriate expertise and experience, give claimants access to all information about their claim and, above all, show them some respect.

The report’s recommendations feed into an upcoming review Treasury will undertake of the legislation that governs EQC.

There’s a poke at the previous government in the report, which says ministerial directions or reviews should be clearly signalled and discussed with EQC “to ensure that they will advance rather than hinder its response”. Cartwright adds: “EQC must not again be left largely unsupported to run a managed repair programme.”

On data systems, there is this edict: “EQC must invest adequately in its data technology to ensure that it never again finds itself with systems that are unfit for purpose when it needs them most.”

Equal dignity without discrimination

It should be no surprise that Cartwright feels the suffering of claimants deeply, or that she demands a claimant-focused response by EQC.

In her state farewell as Governor-General in 2006, Cartwright quoted Eleanor Roosevelt, former First Lady of the United States, on the origin of universal human rights. They begin in small places, close to home, Roosevelt says — neighbourhoods, schools, farms and office. “Such are the places where every man, woman, and child seeks equal justice, equal opportunity, equal dignity without discrimination. Unless these rights have meaning there, they have little meaning anywhere.”

In her report, Cartwright calls for a shake-up of some of EQC’s structural elements.

One crucial aspect is the cap for coverage. As she points out, it’s bizarre to have a cap at $150,000 plus GST when the average building cost for a house is about $400,000.

Also, given its extensive knowledge on land stability, she suggests EQC be given standing to appear in formal land-use planning hearings.

Claim dispute resolution should be standardised, and communications improved, the report says. Steps must be taken to give home owners certainty about the quality of workmanship. Coverage for multi-unit and mixed use buildings should be reviewed.

EQC invests $17 million in scientific research each year. Cartwright says the focus should be broadened into disasters other than earthquakes, and also into social science research to understand the effects on people.

The Commission has embarked on a “transformation programme” to ensure it’s ready for future disasters. But Cartwright raises some reservations.

It’s not clear if the programme is just for operational efficiency, or whether claimants’ views are also being considered. Cartwright worries cash settlements lead “to a continuing legacy of unrepaired homes”, and individual settlements make area-wide solutions, like large-scale land remediation, more difficult.

A residual, but “grave”, concern in the report is the quality of houses in Canterbury, and in Kaikōura/Hurunui, where a large quake struck in 2016. Many homes, especially those with rubble foundations, are poorly equipped to sustain earthquake damage, the report says, and can’t be brought to earthquake resistant standards.

They aren’t the only broken foundations, as such. Many people affected by the Canterbury and Kaikōura quakes worry about how EQC, and other agencies, will respond when the next big natural disaster occurs.

Already there are concerns about areas of higher risk with rising insurance premiums and high excesses, attached to policies that are so restrictive they will provide little financial protection if disaster strikes.

Cartwright says the risks associated with climate change, such as coastal inundation, aren’t insurable under the EQC Act.

“I have been surprised and concerned that EQC has not yet fully grasped the impact it will have on its future work as flooding and tsunami risk increases,” she writes, noting the Commission is involved in climate change research.

As part of its education role, EQC should be telling people what climate change will mean and how to prepare, Cartwright says. At-risk communities need details of the risks they face and how they can respond — not only to individual disasters but changing conditions over time.

“Younger generations clearly recognise the threat of climate change,” the report says. “If we want those young people to have a sense of security in which to raise their families, they will need to know they can insure their homes against the increasing risks.”

David Williams is Newsroom's environment editor, South Island correspondent and investigative writer.

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