Floods show benefits of N.Z. fund

Press, Volume CXIV, Issue 33452, 6 February 1974, Page 12

Floods show benefits of N.Z. fund

The merciful offices of the Australian and Queensland Governments are all that stand between many of the people of Brisbane and financial ruin. J Only about 1 per cent of J the victims of last week’s 'devastating floods will collect ’any insurance on their ravaged homes. j Curiously, although most people in Brisbane had insur.ance against “storm and (tempest,” their policies* did I not protect their property (against "cyclonic flood,” which is what Brisbane got with a vengeance from Cyclone Wanda. CUSTOMERS ANGRY Insurance companies are trying to pacify angry policyholders, who find they have no claims at all. The companies are also searching for ways of clarifying the fine print on their policies, probably with some phrase like "damage by water, however caused.” The question in Christi church is—what would have ! happened if the city had suffered the fate of Brisbane? jWould policy-holders have

' been left lamenting if the Waimakariri River had flowed down Papanui RoadFortunately not. Under the wise and prudent provisions iof the Earthquake and War i Damage Act, 1944, everyone ! would have been looked after. Although the act was passed as a measure of security against the ravages of earthquake, it has also supplied a fund which meets the losses of other natural . disasters. The act and its provisions are unique. The commission’s headquarters in Wellington says that no other country has a fund which will compensate its citizens for damage suffered in disasters of appalling dimensions. AUTOMATIC DEDUCTION Not that the Government I foots the bill. Every time a premium is paid on the insurance of a building or vehicle, the Government makes an additional charge of 5c for each $lOO of cover. The money collected is paid to the Earthquake and War Damage Commission which has two separate funds — earthquake and disaster. The earthquake fund exists •to protect people’s property against “convulsions of nature,” such as earthquakes :and volcanic eruptions. The I fund has assets of more than isl6om, which have mounted

steadily, mainly because there have been no large calls on it. Since 1944, there have been about 30,800 claims for earthquake damage with payments from the fund totalling about |s4.sm. : Claims for extraordinary | storm and flood damage are imet from the commission’s ‘disaster fund, which has !assets of about s3m. Last (year, the commission paid out ion 1703 claims, totalling i $394,000. The disaster fund is not i intended to save insurance (companies from meeting flood and disaster claims. The I.secretarv of the commission (Mr J. L. Gill) says that a house-owner’s policy normally covers damage to structure and contents. The commission’s resources meet the difference between the cover and the loss. For example, a man’s house is swept away by flood. His insurance is $lO,OOO, but the loss of $15,000. The insurance company pays the $lO,OOO. and the commission pays the rest. WAHINE PAY-OUT The heaviest call on the disaster fund in recent (years was to meet the damage caused by the Wahine storm. The commission paid out more than s2m. The earthquake, fund had to pay out $2.6m after the

‘ 1968 Inangahua earthquake, fi i How would the funds sur- < Vive in the event of a catat strophe involving hundreds of I ■ millions of dollars? The com- i Emission would borrow from 11 lithe Government and repayp the ioan out of future pre-!I i miums. |i ; The severe snowstorms in;' s Canterbury and Otago last!’ s year put a drain on the dis- i t aster fund. Old-style farm;: t outbuildings which buckled ;!and crashed in the wind and ’ isnow led to pay-outs totalling c t. 5200,060. Only 5 per cent of’’ ?|the total claims were for; > domestic dwellings. - COMMERCIAL PROBLEM j In its last report to Parlia-! .jment, the commission re- . ierred to the vulnerability of' J the disaster fund to large a commercial property losses r by flood damage. It said there had been a a marked increase in the numsi ber and size of commercial a flood-damage claims, and it a!was evident that in selection ’’and development of some j 'commercial sites there had been little regard to the flood risk, with no adequate measures to protect insured pro- ; pertv against flood damage, t Mr Gill said yesterday that - the disaster fund seemed to; i’be carrying the burden of i.protecting much commercial {property because the owners] [ were not. prepared to pav the , :. high premiums demanded by<

■ insurance companies for once-in-a-century floods. ( While it was permissible i for commercial-preimses ■ owners to rely on the disaster [fund, the extra ordinary! ; storm-and-flood cover had ’been introduced primarily to: assist the domestic property, ’owners when this type of [insurance was not readily, 'available through normal in-( Isurance channels. The commission believes; 'that very comprehensive jstorm and flood protection is; available from insurance firms, and should therefore be able to reserve the proceeds of the disaster fund for protection only against [that type of hazard not, covered on the open insurance market. Footnote: Mr B. E. V. ParI ham, of Christchurch, told 1 “The Press” about the hardship of relatives in Brisbane. Their house, set well above the normal level of Moggill Creek which feeds the Brisbane River, was under water for four days. The family returned home on Sunday, but had to sleep in vehicles to prevent looting. The roof of the house had been broken by motor-boats passing over it. The builders who erected; i the house in 1970 have begun ■ (repairs which will cost; slo.ooo—and there is no in-i i surance cover.