Screwed?

Bill Kaye-Blake gives his bleak assessment:

Well, Christchurch is screwed. Sorry for the language, but it’s true. And the rest of the country should take notice, because this is what will happen to them in a big event. The problem is the government — EQC and Cera — and the insurance companies. It’s the eternal run-around. It’s your worst medical insurance problem while waiting to renew your driver’s licence at lunchtime on a Monday.

The government is doing what bureaucracies do. It is creating processes. It is making sure that everything is correct, that all the boxes are ticked, and, above all, that their asses are covered. So it moves slowly, carefully. Safer to keep people from doing something than allow them do the wrong thing.

Insurance companies are doing what they do. They are minimising their expenses and protecting their bottom lines.

We have been pretty lucky. Our house is perfectly habitable while we wait. It's going to be more expensive to heat this winter as the weatherboards are no longer as tight as they ought to be, and we've been deferring a few other improvements that are best bundled with all the other repairs that are needed. But we're in no particular hurry to get everything done - especially given the 75% chance of  another plaster-cracking event and the 23% chance of another pile-and-foundations-heaving quake.

Bill gives a couple of examples of Christchurch's problems. One of them is worse than he thinks.

He notes that a change in the regs has let insurers deem a lot of red zone properties repairable where previously they were write-offs giving a payout at the cost of building a replacement home; he wonders how they'll rebuild on condemned land. Well, they won't, and that matters. In normal times, insurers have strong incentives not to lowball the cost estimates on repairs versus rebuild; the insured party will notice pretty quickly if the house has not been fixed to an acceptable standard. But in the red zone, there will be no repairs. Instead, if I understand things correctly, insurers provide  notional estimates of repair costs in an environment where the only way of disputing their estimate is commissioning your own estimate and going to court. We might well expect pervasive lowballing of repair estimates that bank on the insured's difficulty of navigating through things.

It's doubly galling that insurance companies can simultaneously hang on the new regs as justification for lower payouts and insist on the older building code in determining the standard to which repairs must be made. It's surprising that there's not yet been a declaratory judgment on whether insurers' "full replacement cost" policies must deliver commercial buildings that meet the code that existed at the time of contract or the code that applies at time of rebuild. Getting a declaratory judgment on this is something a sane Council would have prioritized.

While Council's made some (*) great efforts in getting the sewers and water supply working again, onanistic light rail visions and new stadium plans seem more important to our Mayor and Council than things fundamentally more important to anybody on the East side of town, to commercial property owners downtown, and increasingly to the West-side folks now inconvenienced by rental price increases from East-side refugees.

Wellington ought to be awfully worried about getting EQC fixed before they get their earthquake. And, adopting the Productivity Commission's recommendations about easing up the regs around land use policy isn't just sound policy for housing affordability, it also makes the whole country less fragile in case of earthquake.