Our own experience is that the apparent tardiness with the residential recovery is not any sort of go-slow but a bit of a tentative journey into the unknown for everyone.  The unknowns include both environmental factors - principally land quality - and human factors - how members of the community, including Southern Response, react to things that are being experienced for the first time anywhere in the world. 

I believe that these factors contributed significantly to the protests against Southern Response late last year. 

Despite focus and goodwill, a multitude of highly complex issues are taking time to work through. Many issues continue to evolve, notably around land quality and future seismicity risk, and technical building repair methodology, particularly in relation to house foundations on TC3 land.   

We know many of our customers are frustrated with the speed of their claims resolution. After working their way through the EQC process people who have only recently become 'over cap' now sit in queues alongside others still waiting, due to the issues outlined above, since making a claim following the September 2010 earthquake. We know how frustrating all this can be. 

Scientists and other professionals, insurers, builders, as well as customers with complex claims are currently involved in a journey into the unknown, with no or few local or international precedents to follow. All this has been further complicated by the fact that New Zealand was the only country in the world where 'open-ended' insurance cover (no specified sum insured) applied and which resulted in the potential for all claims to be contestable.    

Other challenges are with policy interpretation as to what is repairable.    

There seems to be confusion, voiced by signs and words at the protests as to whether a house can be both repaired and brought back to an "as new" condition in AMI policy terms (although the term is not defined in the policy).  Our legal advice, which is consistent with recent High Court judgements, is that repairs can be carried out to bring damaged elements of a house back to an "as new condition".  The test takes into account things like the size, functionality and relative quality of the original.   

Using that approach as a benchmark, proportionately Southern Response is rebuilding rather than repairing more houses than the rest of the industry.

In spite of these type of issues, Southern Response's current formal dispute rate is 3.5% of over cap claims and is line with both our forecasts and the experience of other insurance companies.    

Protest action late last year prompted us to have a long hard look at ourselves.  Since then we have:

§  worked to re-engage with our customers.  In one week alone during January we successfully resolved 14 cases that had been in significant dispute.

§  broadened our focus from immediate build throughput to include communicating with people we have scheduled for work in 2015 and 16.

§  introduced policy changes to respond of many of the concerns

§  initiated new processes to provide additional checks on files that aren't moving as quickly as others.

§  provided greater scope for free, independent advice and support for customers through the Residential Advisory Service .

§  extended the opportunity for customers to take complaints to the Insurance & Savings Ombudsman for claims that exceed $200,000.

The protest action has focussed my view that some misconceptions need to be put right.   

Our settlement and build progress is on track with other insurance companies, and most of our customers are moving smoothly through to having their claims met either through repair, rebuild or cash settlement. Read our figures here 

Of the claims for the 6765 over cap properties damaged, more than 40% (2730) are now fully settled.  Another 1627 are either in design, in build or are completed builds.  That's 60% in total with approximately 60 properties per month moving into the build cycle.    

Additionally, we have inspected 70% of our 22,200 out of scope claims (involving damage to paths, fences, patios, driveways and pools) and have resolved 53% by repair or cash settlement. Again this level of progress is the same as that being achieved by other insurers. 

Our current targets, supported by our actuaries' statistical assessment, is that significantly more than 90% of our customers' builds and other forms of settlement will be completed by the end of 2016.  We currently anticipate the others will remain entrenched or incapable of progressing, despite our best efforts.

Despite the progress, there certainly remain challenges - some that we have been addressing well and some where we could have done better.   

We will strive to work positively in all matters but there will be areas where we won't be changing our policy.  We won't be 'throwing money' at claims to resolve them. In some cases, people continue to believe the cost to rebuild their house is significantly more than what it can be built for, while others demand a rebuild where we believe that the house is repairable. We will continue to contest these where necessary.  In a recent High Court case, a  customer was apparently persuaded to make a claim for Southern Response to pay to $1.2 million  to build a standard four-bedroom house (excluding the land).  Although the customer achieved certain concessions, the judge was critical of the "unjustified and ill-advised" extent of the claim. This was not an isolated case.    

The protests did however show us that there are customers with whom we need to re-engage now and who need more of our time. Accordingly, today we announce our progress against the commitments to system reforms that we first signalled in late December 2013.  We have been working hard over the Christmas break to achieve them.   

But re-engagement needs to be a two way thing and involve trust that may have been lost, if the interaction with many of the protesters is any guide.    

The comments of our customers and the protests have led us to believe we should support, promote and fund a free independent representation service for our customers to support that re-engagement.    While some customers are pursuing alternative courses of action to resolve their disputes, I urge them to consider whether the systems that we are putting in place, including direct re-engagement with us and free independent support through the Residential Advisory Service, may achieve a more effective, speedy, less stressful and cheaper outcome for them. Of note, pursuing alternative courses of action will not void any other avenues they may be taking; for example we are discussing with the Insurance & Savings Ombudsman Scheme its potential to consider complaints, even if  proceedings have been issued in Court. 

We commit to making improvements and to learn from any mistakes through direct interaction with all willing customers.  For those we can't resolve together, we are assisting to put in place more comprehensive, end-to-end dispute resolution vehicles.  I look forward to the challenges 2014 will bring and assure our remaining customers that we will continue our efforts to bring about a sustained, ever-increasing pace of recovery.