November/December 2012

Over recent months the pace of our rebuild and repair programme has continued to increase and we are on target to reach some significant milestones for our customers by the end of this year, and beyond.

One of our most significant targets is to complete our over-cap rebuild and repair programme by the end of 2015. Based on the claim numbers we currently have, IAG expects to complete around 1,700 new homes and 3,000 major (‘over-cap’) repairs by this date.

Without a doubt, it has been a year of ongoing change, complexity and frustration for some customers.

Those complexities have included understanding how best to respond to land zones, technical categories, land damage, changed building codes and apportionment, among other such issues. Our customers have impressed on us that one of the most important factors for them is clarity around who is managing their claim and what they can do to move forward.

Momentum continues to buildIn response to that feedback, our most recent focus has been on ensuring all customers with an over-cap claim have certainty by the end of this year:

• whether their home is economic to repair or will need to be rebuilt.

• what their settlement options are so they can make a decision on how they would like to move forward based on their own circumstances.

• which quarter between now and 2015 their rebuild or repair is scheduled to begin.

• where possible that their claim is over-cap and managed by Lantern.

Non-EQC customers

Over recent weeks we have also been writing to update all our customers who have non-EQC claims with us. These are customers whose main claim for house and outbuildings is being managed by EQC while their claim for footpaths, driveways, fences and other non-EQC property is being managed by Lantern.

With close to 5,000 non-EQC claims either settled or to be settled shortly, and around 1,000 assessments being completed a month by IAG, we are on target to complete our non-EQC programme by end of 2014.

Overall, we continue to prioritise our worst affected and most vulnerable customers. If you require any assistance, please contact your Claims Case Manager for assistance. Alternatively phone us on 0800 800 800.

• Our rebuild and repair programme

• Update: EQC announces land settlement timeframes

• Factors affecting whether your home is economic to repair or needs to be rebuilt

• Update for customers in the Red Zone

• Good response to Customer Community Forums

Inside this issue:

Earthquake Update

As more customers are receiving their claim settlement options and choosing how they would like to proceed, IAG continues to build up its reinstatement programme including the following IAG milestones:

• As at early November, 900 of our customers had settled their claim by purchasing an existing home.

• We are on track to complete 100 new homes and 50 major repairs by this Christmas.

• We’re also on track to complete 500 new homes and 450 major repairs by mid next year.

• We have 85 new homes being referred to our project manager, Hawkins, each month to start the pre-construction process.

• We currently have 90 major (‘over-cap’) repairs being referred to our project manager, Hawkins,

each month to start the repair process.

• Close to 5,000 non-EQC claims are either settled or have settlement underway, with around 1,000 assessments being completed each month.

Our rebuild and repair programme

As at 20 November we had completed the following:

1 Feb–20 Nov 2012 Rebuild Repair Driveways, paths etc

Pre-construction 334 585 1810

Construction 229 97 863

Complete 49 33 2346

The numbers quoted are for all IAG brands: NZI, Lantern Insurance, State and IAG Financial Institutions, which is the division responsible for general insurance policies offered through ASB, BNZ and The Co-operative Bank.

Note: Pre-construction refers to the time when Hawkins and homeowners plan the work together, and all necessary resource consents are obtained.

In the last issue of this newsletter we provided a brief overview to customers receiving an EQC settlement for land damaged by the earthquakes. Note that Lantern does not cover land. Claims for earthquake damaged land are managed by EQC.

In early November, EQC confirmed they had two separate streams of work underway to settle land claims; settlement in the hill suburbs, and settlement on flat land (mainly in TC2 and TC3).

1. Port Hills: settlements should be completed early in 2013.

2. On the flat: EQC still has to assess the estimated cost to repair damage. Unlike in the hills, some of the damage types are uncommon and information (e.g. about the expected cost to repair) is still being gathered.

Cost assessments will begin early in 2013, with EQC advising settlement should follow the assessment within two months in most cases. Assessment will move roughly east to west.

EQC notes that all land claims should be settled by the end of 2014.

How EQC settles land claimsEQC will determine how they will settle your claim for land damage.

If EQC provides you with a cash settlement for your land and / or damaged retaining walls, we will discuss with you the contribution of that settlement to reinstate the land and / or retaining walls in line with any building work we will be undertaking on your property.

EQC’s information on their land settlement process is in their latest newsletter: http://www.eqc.govt.nz/news/eqconnects-13-november-2012

You can also download EQC’s information booklet on land claims: http://www.eqc.govt.nz/canterbury-earthquakes/land-claims

Update: EQC announces land settlement timeframes

We are committed to helping you move forward with a home that will keep you safe and secure for many years to come.

This means understanding the land your home is built on and its expected performance in any future earthquakes. We also need to ensure the rebuild or repair we are responsible for is in line with the applicable building code and the policy entitlement for your property.

The final determination around whether a house is economic to repair or will require rebuilding has been impacted by the many changes we have experienced since that first earthquake in September 2010.

These have included our ongoing level of understanding around the land and also changed building guidelines which were updated and released over a year after the September 2010 earthquake.

Assessments prior to November 2011 used the building guidelines current until that time. Assessments conducted after that date used the revised rebuild and

repair guidelines released by the Department of Building and Housing in November 2011.

The different floor level criteria in the guidelines meant previously a house with only relatively minor level differences (from as little as 25mm overall) could have fallen into the foundation rebuild category.

The changes in the revised guidelines (including the new floor levels) have been applied to our overall decision-making around whether a house is economic to repair or needs to be rebuilt. For some customers, this may mean a change from their initial assessments in the early days when the previous guidelines were used.

The Christchurch City Council, Selwyn District Council and the Waimakariri District Council have endorsed the revised guidelines. Your local council is responsible for the building consents process for your house.

If you have any questions about your claim, please speak to your Claims Case Manager.

Factors affecting whether your home is economic to repair or needs to be rebuilt

We continue to prioritise our customers in the residential red zones to ensure they have all the information they need to consider their settlement options.

Customers in the flat red zones: you should have received your information and settlement options from us. If you have not received your information or require assistance, please contact us immediately.

Customers in the Hills red zones: we continue to send out settlement information and options. As some Hills properties can be more complex, additional expertise may be used to complete and check assessments.

Update for customers in the Red Zone

If you have to vacate your property as part of the reinstatement process, it’s useful to start thinking ahead. You may wish to discuss your plans with your bank and where required, consider storage needs and temporary accommodation needs for you, your family and any pets. For customers choosing to have their home reinstated:

• A typical ‘new build’ takes around 42 weeks with around the first 22 weeks in preparation and the remainder 20 in the actual building.

• While the length of each ‘over-cap’ (major) repair varies according to its complexity, overall it generally takes around 35 weeks.

Important: as each home is different, you need to speak with your Claims Case Manager about your particular property reinstatement timeline.

What you can do to plan ahead

In the last issue of this newsletter we extended an invitation to our customers to attend our IAG Customer Community Forums being held on 5, 12 and 26 November.

Providing clarity for customers has been a primary focus of our Canterbury Recovery team. These evening events have given us the opportunity to outline our rebuild and repair programme and overview how we are dealing with some of the more complex issues such as TC3 foundation designs, land damage and retaining walls on the Port Hills.

Around 350 IAG customers attended the first two forums and had the opportunity to ask questions about topics of interest to them and gain clarity around where they fit into Lantern’s rebuild and repair programme.

During the evening customers were also urged to consider their settlement options and the steps they could take to help progress their claims. That included speaking to their mortgagee, considering their temporary accommodation requirements for families and any pets, and which settlement options best suited their circumstances.

Good response to Customer Community Forums

The following includes some of the questions asked at the Forums.

After several assessments and a payout by EQC of $128,000 I have now been told I am not necessarily ‘over-cap’. How can that be when the EQC ‘cap’ is $115,000 (inc GST)?

EQC apportions the cost of damage across a number of events. In some cases this could mean that your initial EQC payment will be attributed across several events and therefore may not exceed an EQC cap for a single event. Only once EQC has completed your apportionment will we know if your damage from a single earthquake is over-cap or not.

My claim is ‘under-cap’. But as we are only just under-cap and you haven’t completed drilling as I am TC3, it seems to me I will go ‘over-cap’. Why don’t you just take over my claim?

We’re working with EQC on TC3 claims likely to go over-cap to agree management of them.

How are you able to provide costings on TC3 houses and ‘economic to repair’ assessments when you don’t know the foundation costs as the drilling has not been completed/analysed?

Our TC3 assessments are based on damage to the ‘ground up’ structure and on the cost to repair the foundations as they were prior to the earthquake. Once we have the geotechnical report and recommendations we can then factor in the TC3 foundations costs. Often these costs will be similar if your property is a repair or rebuild. The most important factor is the assessment of the structure above ground and if it is economic to repair.

My neighbour’s property has been drilled. Why don’t you just use their drilling information for my property? Why do I have to wait?

Each individual TC3 property requires a geotechnical assessment, though not every property may need to be drilled. Our geotechnical engineers may be able to use the information from the neighbours’ properties and will decide what further investigation is required. At the moment Lantern is using its geotechnical engineering resource for our worst affected priority customers first.

There are five of us on a cross-lease multi-unit property and we are all with a range of insurance companies. How do we move forward when we are all assessed individually, and I’m over-cap and my neighbour (who I share a wall with) is a $10,000 repair?

Insurers and EQC start by assessing their own customers’ properties to understand the extent of the damage. They then work together to understand the impact of your property damage on your neighbours to provide a solution. The best thing you can do is talk to your neighbours about who your insurers are. Sharing information will help move your claim forward.

Around 350 IAG customers attended the first two forums and had the opportunity to ask

questions about topics of interest...

IAG’s Executive General Manager Canterbury Recovery, Dean MacGregor addressing customers at a recent Forum.

This newsletter is a general guide only and does not constitute legal advice or provide complete information. As each situation may be different, we suggest you obtain your own legal advice about your situation. We reserve the right to change, update or correct any information from time to time without notice.