Insurers may have improved since the Canterbury earthquakes, but a new review reveals many still fell short when it mattered.
In early 2023, two devastating weather events – the Auckland Anniversary floods and Cyclone Gabrielle – led to more than 118,000 insurance claims and nearly $4 billion in damage. The Financial Markets Authority (FMA) examined how insurers handled this surge and found that while some practices have evolved, many policyholders faced confusion, delays, and inconsistent service during a time of crisis.
Among the biggest issues was communication. Many first-time claimants didn’t understand what their policies covered or how the process worked. The FMA found that only 43% of insurers included information on how claimants would receive updates, and cash settlement offers often came without a clear explanation that further claims might still be possible.
Policyholders were also left unclear on basic insurance concepts like gradual damage or the role of the Natural Hazards Commission, adding to frustration and dissatisfaction.
Oversight of third parties was another major concern. While insurers technically manage the claims process, many outsourced parts of it to assessors and contractors with minimal supervision. Brokers and dispute resolution schemes reported delays, poor communication, and even incorrect assessments from some adjusters – issues that consumers inevitably blamed on the insurer. One example in the report involved a claimant who received a settlement based on the wrong assessment after visits from three different assessors and several contractors.
Insurers did take steps to support vulnerable claimants, including door-knocking, working with local MPs, and offering mental health resources. Some quickly adapted their internal processes and set up specialist teams to prioritise these cases. But the report also noted that not all insurers acted with the same urgency, and some failed to recognise financial vulnerability early enough.
While many firms had catastrophe response plans in place, the unprecedented volume of claims stretched them thin. One insurer received five years’ worth of house claims in just two weeks. Others flew in hundreds of staff from overseas, but this diverted experienced workers from handling regular claims, resulting in incorrect advice and slower service for those not affected by the weather events.
Complaints data underscored ongoing problems. The most common issue was the slow progress of claims, particularly for complex home damage. Consumers also struggled with unclear timelines, multiple points of contact, and a lack of understanding around who was responsible – insurer, builder, council, or the NHC. Some of these frustrations echoed past disaster responses, despite industry promises of improvement.
The FMA also flagged the risks of favouring cash settlements over managed repairs. Without oversight, there’s a real chance some homes could remain unrepaired if payouts fall short. This mirrors concerns raised after the Canterbury earthquakes, where insufficient settlements contributed to a backlog of unresolved damage.
