Debate on Crown Entities, Public Organisations, and State Enterprises — Earthquake Commission

I am very pleased to speak in this debate on the report on the Earthquake Commission. I speak in this debate as the member of Parliament for Christchurch Central. I want to talk about the operations of the Earthquake Commission in Christchurch. Christchurch people love to hate the Earthquake Commission. We love to hate the Earthquake Commission because in the last 3 years things have been very tough in Christchurch. Nothing has been simple about our earthquakes, and the Earthquake Commission has had to work under very difficult circumstances.

But we are also very aware that New Zealand is in a unique insurance situation because of the Earthquake Commission. When you look at other similar earthquake-prone countries, especially those around the Pacific Rim—the US and Japan—only about 15 to 20 percent of ordinary citizens have their homes insured, simply because of the cost, and no one’s land is insured at all. I visited San Francisco in 2012 and I was horrified to see properties, homes, that had been rebuilt on the area of the land that had been very hard hit during the 1989 Loma Prieta earthquake. These homes were mostly uninsured, and, certainly, nobody had land insurance. They were uninsured because of the cost of insurance. If you live in an earthquake-prone country, unless it happens to be New Zealand, it is prohibitive to pay for insurance for normal families. That situation would be the same here, except that the Earthquake Commission takes the very high - risk first $100,000 of risk, so that supplementary insurance is affordable. So, although we love to hate the Earthquake Commission in Christchurch, I cannot imagine what it would be like in Christchurch if 80 to 85 percent of our homes were uninsured and our land was also unprotected.

I acknowledge that there have been issues with Earthquake Commission claims. The size of the event, the number of earthquakes, the fact that most people have multiple claims, the management structure of multi-unit properties, and the tough environment for everyone who works in our communities have made it particularly hard. The Earthquake Commission has had to scale up very fast. But I sincerely believe that everyone in the Earthquake Commission is working hard to settle claims and we are now seeing real progress. Ultimately, we have to remember that every last claim will be paid out and that the Earthquake Commission will continue to provide New Zealanders with insurance long after Christchurch homes are restored and our city is rebuilt.

Let us now have a look at the Earthquake Commission’s statistics. We can get a good idea of the size of the task in hand and of the progress that has been made. Since February 2011 the Earthquake Commission has had 1.64 million interactions with homeowners. That is equivalent to dealing with every single person who lives in Auckland and in Northland. The assessors have done 750,000 assessments or reassessments after multiple earthquakes, which is equivalent to two assessments for every single person who lives in Christchurch. The Earthquake Commission has paid out $7.4 billion including GST.

Let us have a look at how those claims pan out. Eighty-three percent of cash settlement claims have been completed. Ninety-one percent of all claims under $15,000 have been resolved. Seventy-five percent of claims between $15,000 and $100,000 are settled. And 90 percent of overlapped claims are settled. That means that 90 percent of those claims have moved on to the insurance companies for a rebuild or a repair. On top of that, 78 percent of properties in the Canterbury Home Repair Programme are complete.

I really do want to focus on vulnerable customers, because this is a priority area of the Earthquake Commission and it is an area that concerns us all. Eighty-six percent of the claims of vulnerable customers are complete, and the Earthquake Commission is absolutely committed to fixing the homes of the rest of these people. One of the issues that we have had in Christchurch is that it has been very difficult to get to the people who most need our help. If you compare an earthquake like the Christchurch—

One of the few things that I would agree with Nicky Wagner on is that things have been tough in Christchurch. Research out today from Healthy Christchurch shows that 65 percent of Christchurch residents reported feeling tired in 2014, and that is a 10 percent increase on 2012. Certainly, dealing with the Earthquake Commission and with insurance claims has contributed to that feeling of tiredness, particularly when often you have got very poor communication by the Earthquake Commission, so that at least 5 percent of Christchurch households have had to resort to the Official Information Act to try to get some basic information out of the commission. The commission has got a very ambitious target of completing all repairs on earthquake-damaged homes by the end of this year. That is another more than 25,000 full repairs that it is yet to do. The claim that that will be done by the end of this year makes many Christchurch residents laugh out loud, when they are still dealing with that dance and interaction with the Earthquake Commission.

If we had a Green Party in Government, we would have had the Earthquake Commission and Housing New Zealand working alongside each other to tackle the housing crisis. We know that the Minister has denied that there is a housing crisis in Christchurch, despite the fact that there are regular reports in the press of people surfing on friends’ couches, sleeping in garages, and sleeping in cars. We do have a housing crisis because so many people have had to move out of their homes in the red zone or because their homes are uninhabitable because of earthquake damage or flooding vulnerability. If we had more joined-up thinking, we would have had Housing New Zealand building more State houses. We would have had a progressive homeownership scheme where people in those homes could progressively buy them from the State during their time in the house, without getting a big mortgage and without heavy debt, just as many of our parents did using the former family benefits. If we had joined-up thinking, we would have had the Warm Up New Zealand: Heat Smart programme going at full strength, not being savagely cut, as National has done.

The Earthquake Commission has a winter wellness programme, and that is a response to the fact that many homes in Christchurch have lost their primary heating source through damage to chimneys, fireplaces, and woodburners. Certainly, the Earthquake Commission programme has meant that several thousand homes across Christchurch have had new heat pumps installed.

💬 Hon Gerry Brownlee: 20,000.

All right, 20,000, Minister—thank you. But the Earthquake Commission and the Government have missed the opportunity to substantially improve the housing stock in Christchurch through a full Warm Up New Zealand: Heat Smart programme. It has missed the opportunity to substantially reduce the 600,000 homes across New Zealand that are cold, that are draughty, that contribute to health issues for children, and that see kids being sick and off school and their parents taking time off work. We want to ensure that all our homes are warm, dry, secure, and healthy. The Government gave the cold shoulder to Christchurch by making a major cut in the Warm Up New Zealand: Heat Smart programme, so it was not working alongside the Earthquake Commission to make the most of the crisis in Christchurch. It could have ensured that there was more subsidy assistance available so that people could insulate their homes at the same time as they were undertaking major earthquake repairs. The Green Party’s Warm Up New Zealand: Heat Smart programme would do that by providing subsidies for wall insulation.

Instead, what did the Earthquake Commission do? Initially, it opposed the betterment of homes and then it allowed it, but homeowners have to cover the cost of putting in wall insulation while full repairs are under way. The Green Party would provide assistance to enable that to be more affordable. That whole scheme would cost about $35 million in Christchurch for making sure that we improve our housing stock, we build it back better post-earthquake, and we do not simply replace like with like and miss the opportunity that we have to create much warmer, drier, and more healthy homes. The Earthquake Commission has done a bit with the heat pumps but it has not used the opportunity that the earthquakes have provided to provide more insulated homes so that everyone has a warm, dry, and healthy home.

National has significantly reduced the Warm Up New Zealand: Heat Smart scheme. Initially, in the first 3 years there were over 200,000 houses insulated; now its target is only 46,000 homes.

Can I first of all say that it is blindingly obvious to anyone that the Earthquake Commission has faced a big job and it is in no one’s interest to do as the current member for Christchurch Central did and assume that challenges to the current system are a proposal to get rid of the Earthquake Commission. That is a nonsense conclusion that Nicky Wagner reached and I know that nobody is proposing that. But we cannot deny the fact that the level of arrogance, bullying, and incompetence displayed by the Earthquake Commission is having anything other than a negative impact on residents in Canterbury. I think the same goes for the Minister responsible for the Earthquake Commission, actually. Nobody has denied that the Minister, who has got several portfolios—perhaps two too many—has got a big job in front of him. Nobody is arguing about that. But it does not mean that when somebody challenges it, questions it, or says that this is clearly not going right, we should be subject to bullying or abuse. That shows a level of being out of touch with what people in Canterbury are going through.

I want to touch on just three points briefly. The first is the self-imposed time frame that the Earthquake Commission has set for settling claims. The second is its method of cash settlements, and the concerns I have about that. The third is in relation to multi-unit dwellings. I think that people in Canterbury deserve certainty, they deserve support, and they need to know that the Government and Government departments and agencies of Government are on their side and working for a positive resolution of the huge tragedy that everyone has felt in one way or another. It has affected different people in different ways; everyone in Canterbury has been affected by the earthquakes. What they need now is a Government that is clearly on their side and that can help them move to a positive solution and outcome.

Let me go back to the first of the three points—the self-imposed time frame. Ian Simpson has written to us all again. He is the chief executive of the Earthquake Commission. He has just written to us and said: “I’ve made a commitment to you to fix your home or settle your claim by December of this year.” Then he says: “While I’m confident of our 2014 target, if we have to run into 2015, we’ll do so.” Well, that is hugely reassuring. We are committed to fixing everything by the end of 2014, but if we do not make it, we go into next year. Well, what a reassurance that is! This is in writing from the chief executive. That gives us no reassurance, Minister, and I think you should be on his case and on the case of the chair of the Earthquake Commission to give us correspondence and give us time frames that mean something or stop wasting the stamps. This sort of dribble does not help anyone.

The second thing I want to talk about is cash settlements. In this same letter, Ian Simpson says: “We will not be using large-scale cash settlement to meet our December target. We will continue fixing homes until the job’s done.” That is just untrue. The Earthquake Commission is bullying people, including the most vulnerable people, into taking cash settlements, and I think it is an outrage and it is about time that Minister Gerry Brownlee stood up to its bullying tactics and said that cash settlements should be an offer, not a compulsion, and people who do not want to opt out should not be bullied into doing it. I have got two examples. One is a 95-year-old constituent of mine who still has plywood cladding on the outside of her home—a well-under-cap, multi-unit dwelling—and the house next door is going to be demolished. She has been told in writing that the Earthquake Commission has yet to develop its policy on multi-unit dwelling, so she is going into her fourth winter in an unclad home and it is cold, Mr Brownlee. It is just cold. She is not blaming you. She is pretty generous, but I think that the buck stops with the Minister and she should not have to do that. She has been told she can cash settle or join a very long queue. She is 95 years of age. She is competent. She is able. But it is the Earthquake Commission’s job to fix her house, not hers.

I have got another example that I will just briefly read out to the Committee. This is from a senior claims manager at the Earthquake Commission, who says to a person who does not want to cash settle: “I will again insert our rights to cash settle” and quoting section 29 of the Act. A bullying threat to cash settle, not an offer, is not good enough, Mr Brownlee. The Minister needs to take responsibility for stopping that practice.

I should respond to some of those comments offered by the Hon Ruth Dyson. The first point I would like to make, though, is that the Earthquake Commission has to date settled 141,000 claims and that is an 83 percent settlement rate. Yes, Ruth Dyson is right to say that multi-units present a problem. Part of the problem is that where you have multiple buildings—these are blocks of flats, apartment buildings, or anything else—then there can be multiple insurers over them. There is also the problem, which Ruth Dyson illustrated very well by talking about her constituent, whom I would like to know a little bit more about, I must say, because that does cause me some concern—

💬 Hon Ruth Dyson: What, so you can abuse me again? No way, José.

Well, you see, there is the problem. I genuinely stand in the Committee and say that if you have got that person and they need help, I would like to be there to help them, and I am told that all that is going to happen is that the member will get abusive. This is ridiculous. Here we are. Here is the deal. That lady clearly has got a problem with her house, no doubt about that. But what Ruth Dyson said is that the property next door is going to be demolished, so that means that the adjoining house—if we look at this box here with all those boxes, that is a multi-unit. I do not know where in the units her house is, but if one has to be demolished next to it, it is going to cause damage to her house. There is no question about that. So the question has to be who pays, where, and what insurance gets triggered.

The worst we have got is a block of 43 flats or apartments all together where there are 16 insurers. The insurers are all saying: “Well, hang on a minute. My responsibility is for this bit over here. If you fix your bit, you’re going to cause me more expense.” So behind the scenes there has been a huge effort to get insurers to try to sort this out. In the end, guess who is truly responsible for this appalling problem? It is the legal fraternity of Canterbury, frankly, because there have been body corporate laws in place and, repeatedly, lawyers have conveyed properties ignoring the body corporate laws—willy nilly ignoring the body corporate laws. So when I see some of these flash lawyers around town start pontificating on what the Earthquake Commission should be doing or what private insurers should be doing, I just put it back on them and ask about how many multi-units that particular lawyer has conveyed in their time, ignoring those body corporate rules.

All I am saying here is that this is a very real problem. It is not something that you can fix by standing up and screaming and yelling at people; it takes a lot of work to get through it. We are making those commitments and we are settling those particular issues bit by bit. I have got to say that coming into the House or going on the TV or getting in the newspaper and having a flick at some of the Earthquake Commission people is far too easy. They are Canterbury residents themselves. Many of them have got damaged houses themselves. They know what the reality of living in the city is, and they come to work every day and deal with people’s problems. I admire them for doing that, and, frankly, the statistics show that they are doing a very good job.

I want to briefly finish on the comment from Eugenie Sage, when she talked about the latest wellness index from Canterbury. Firstly, the Canterbury Earthquake Recovery Authority contributed to that cost, as did private insurers, and I understand that the Earthquake Commission did, as well. So we want to know what the situation is. The international literature tells us that the third year after an event is always the hardest. We need to know the extent of that problem, and we are not walking away from it. There are services available for people who are suffering those stresses in their lives. We know that getting people through this is going to be settling all of the Earthquake Commission issues and getting people back into as much as possible of the groove that their life used to be. That is the commitment the Government has made through the Earthquake Commission, and we have not walked away from any responsibility we have in Canterbury one little bit. It is disappointing that people find a need to misrepresent situations to try to paint the worst picture of them.

I say again to Ruth Dyson to tell me what that poor woman’s situation is. I would like to look at it because I think something more should be done for her. To suggest that the member has let her sit for 3 years in a cold house and has not told someone who can do something about it is equally disgraceful.

The Government’s handling of the whole earthquake recovery in Canterbury has been a test for both the Earthquake Commission and the Government. After more than 3 years, the conclusion has to be that although some good things have been done, there is still far too much that has not been done and still far too many issues that are unresolved. Neither the commission nor the Government has scored a pass mark, and their report cards should read “must do better”. The Budget forecast a surplus of close to half a billion dollars, but at the same time the budget for Canterbury earthquake matters was reduced by about half a billion dollars. That indicates that the budget for Canterbury earthquakes was reduced not because that was possible given the progress of recovery projects—or, more accurately, the lack of progress—but because this part of the Government’s Budget was an easy manipulation to create an artificial surplus for election-year purposes.

That has been confirmed within the last few days, when the Prime Minister indicated that far from it being possible to spend less, the Government will most likely have to face an additional $5 billion or more for the rebuild over coming years, as the overall cost has escalated. The Government is simply not being transparent about the real size of the contribution it will need to make. This issue alone makes its claimed Budget projections and the forecast surplus an absolute farce.

Most people in Canterbury are concerned about the slowness of so many aspects of the rebuild and the dilatory way the Government and its agencies have handled the needs of the city. Infrastructure repairs are taking far too long. Demolitions are still not done after 3 years or more. Rebuilds are only just getting started. Planning gives little cause for confidence to people who need to make decisions about their investments. Insurers are getting away with blue murder. Decisions on Port Hills properties are still not made, and the list goes on.

But one of the worst performances by all agencies has been the failure to deal with flooding in one part of Christchurch in particular. This was a problem well known soon after the earthquakes, but 3 years later and several floods later, there has still been no action on the ground. That is not good enough from the Government, and it is not good enough for the Government to blame the city council either. Flooding is clearly an earthquake effect and it is a Government responsibility. The planning should have been completed and the work started by now to relieve those flooding problems. Purchase offers without red zoning for those to whom the work would not be effective or would be too slow should have been made by now. This is a disgraceful absence of action by Government agencies, and there will likely be more flooding of homes still to come this winter.

Another disgraceful performance has been over compensation for red-zoned, uninsured, or bare land. The offer of 50 percent of 2007 valuations was never justified or justifiable. The courts have now said so, and now the red zone quake outcasts have been given leave to apply to the Supreme Court to have the whole red-zoning process for all of Christchurch deemed illegal. That would be catastrophic as a result for the Government and for New Zealand as a whole. The hearing is in July. The Supreme Court bench will not be easily influenced by political considerations. So, not only is the 50 percent offer clearly illegal but we face the prospect that the whole red-zoning concept may be illegal, too, with all the ramifications that that will have.

If that is not bad enough, the Port Hills people still waiting for a decision have been told that they will have to wait even longer until the court has made a decision on red zoning. These people are still suffering. They have been suffering for 3 years or more. They are paying mortgages, a proportion of rates, and rents all at the same time. How would you, Mr Chairman, like to be in that position? The Government and its agencies should have made better decisions in the first place.

Report noted.

AgResearch