Abolition Of Franchise On Earthquake Claims Unlikely

Press, Volume CI, Issue 29824, 17 May 1962, Page 21

Abolition Of Franchise On Earthquake Claims Unlikely

(New Zealand Pres* Association)

WELLINGTON, May 16. The abolition of the franchise for earthquake insurance under the Earthquake and War Damage Fund would almost certainly necessitate an increase in the premiums, the Minister in charge of the fund (Mr Kinsella) said today.

The question of removing the £lO franchise or reducing it below £lO had been carefully examined several times.

“I made inquiries last year, but could see no way out of the problems,” he said. One of the main problems

was that, in cases of damage amounting to less than £lO, it was often impossible to determine whether one was dealing with earthquake damage or not. The investigation of the claim, which would be indeterminate in many such cases anyway, would cost more than the amount of the claim.

"Though sums under £lO are small, they very quickly mount up,” Mr Kinsella said, "and would cause such a drain on the fund that higher rates would almost certainly be necessary.” Twice during the term of the previous National Government the franchise had been reduced or simplified, in the light of experience. But he did not think it could be reduced any further. Most of the damage of less than £lO could be covered with household effects on a general insurance of household risks. "Things like vases come into the under £lO class,” he said. “If a crystal decanter on a mantelpiece has been broken, it is quite impossible to tell whether it was broken in an earthquake.

“As a general check, we work on the Mercalli scale of earthquake intensity, but many earthquakes are in the doubtful category. ‘‘How are you going to determine that a broken window happened in an earthquake?” Mr Kinsella said he realised that earthquake insurance was compulsory in New Zealand, but it was quite impossible to sort out very small damage. It was not possible to give an exact figure for the number of claims that had resulted from Thursday’s earthquake. About 200 had come in from Greymouth so far, and 400 from Westport. There had been extensive minor damage and, conse-

quently, there was some duplication in the claims, said Mr Kinsella.

It was not possible at the moment to estimate their total value.

"Most of the damage has been to chimneys. Art. this time of the year it is essential to get them repaired to provide heating and cooking facilities in order to get the people .back into their homes,” he said.