Weather Events Claims Insights

Executive summary

Background

Part of the FMA’s role as conduct regulator is to review and respond to events that test the capabilities of our regulated population. This report provides observations and key findings from our research into the effectiveness of Aotearoa New Zealand’s domestic fire and general insurers’ claims processes during the NIWE, which took place in early 2023.

The Auckland Anniversary Weekend Floods and Cyclone Gabrielle were the largest weather events to impact the country since Cyclone Giselle in 1968, resulting in 118,000 insurance claims and close to $4 billion in damage to insured property¹. The scale and proximity (both chronologically and geographically) of these events created an unprecedented surge in claims. Many of these claims were highly complex, requiring a high level of resource and expertise.

Our review

To understand the performance and efficacy of claims processes, we asked seven fire and general insurers to complete a self-reflection survey. This covered six key areas that we believe facilitate best practice for claims settlement: communication, project management and oversight, consumers in vulnerable circumstances, resourcing of claims handling, complaints handling, and business continuity planning. The review was restricted to domestic insurance claims, which for the purposes of this report, means house, contents, and private motor vehicle policies.

To ensure fair and balanced findings, we sent a separate survey to five large brokers that were also involved in the NIWE response, and the three dispute resolution schemes (DRS) that dealt with complaints arising from the events.

The report’s framework is based on a similar review undertaken by the Australian Securities and Investment Commission (ASIC) following Australia’s severe weather events in 2021 and 2022. Our methodology and scope are outlined in more detail in the appendix.

Overall, insurers demonstrated that they have incorporated learnings from previous significant events and are working to further adapt their processes to improve the claims experience for consumers.

We have identified opportunities for improvement to ensure consumers are treated fairly by their insurer when a major event occurs.

Next steps

While there have been improvements in the conduct maturity of most insurers since previous significant events, we do see areas where we can continue to work with insurers, so that the consumer experience during future events is improved. This work will be pursued via our supervisory activities, consistent with our regulatory priorities.² Insurers should consider the examples of good practice, areas for improvement and recommendations outlined in this report, and where appropriate implement pragmatic changes to improve outcomes for consumers.

¹ ICNZ North Island Weather Events Report | icnz.org.nz

² 2025 Financial Conduct Report | fma.govt.nz

Detailed insights

In this review, we have applied a conduct lens to our findings using:

• the Financial Markets Conduct Act 2013 (FMC Act),³ which sets out conduct obligations for market participants
• the 2017 Guide to the FMA’s view of conduct (the Guide),⁴ which provides market participants with guidance on how we interpret and apply conduct obligations.

Given that the NIWE occurred in 2023, we have framed our expectations to be consistent with the FMC Act, supplemented where applicable by the Guide.

Subsequent to our review, the CoFI regime came into force⁵ and we released our approach to outcomes- focused regulation,⁶ which sets further conduct expectations and clarifies how the outcomes link to the FMA’s main statutory objective and the purposes of our legislation. To assist insurers with their preparation for future events, we have included commentary on the most relevant parts of CoFI for each key area.

What we want to see

We expect insurers to be reviewing their product offerings and services, including claims processes, to improve the consumer experience during the next large event – and to comply with the minimum requirements for fair conduct programmes (FCPs). We have signalled⁷ that as part of our initial supervision of insurers under CoFI, we will focus on the product and service reviews in financial institutions’ FCPs.

³ Financial Markets Conduct Act 2013 | legislation.govt.nz

⁴ A guide to the FMA’s view of conduct | fma.govt.nz

⁵ For detailed information on the CoFI regime, see: CoFI legislation | fma.govt.nz

⁶ Outcomes-focused regulation | fma.govt.nz

⁷ FMA letter sent to entities licensed under the Conduct of Financial Institutions regime | fma.govt.nz

Communication

What we want to see

Consumers need clear, effective, and consistent communication throughout their claim experience. Insurers should proactively inform consumers of what to expect at all stages of the claim lifecycle, including the process, expected timeframes for progressing the claim and receiving updates, and status of the claim. It is important that consumers can easily access this type of information when they need it, to reduce frustration and confusion.

More generally, insurers’ communications should help to increase consumer understanding of insurance policies, to minimise confusion and delays at claim time. Communication related to the insurer’s relevant services or associated products needs to be timely, clear, concise and effective, with processes formalised within the FCP.⁸

Findings and good practice

Insurers acknowledged there were difficulties managing the large volume of phone calls from consumers due to the multiple affected areas and the large scale and proximity of the two events. However, most insurers were able to direct large percentages of claim lodgements and enquiries onto online platforms by utilising direct email and SMS. By proactively guiding consumers to online lodgement, one insurer lodged 75% of claims this way, compared to 56% during business-as-usual.

Insurers provided instructions and information on their websites and social media so consumers could find out what to do in the immediate aftermath of the events. One insurer’s data analysis showed the claims guides on their website were accessed and downloaded on a regular basis during the NIWE.

Staff were immediately redeployed to provide capacity and capability at lodgement, reducing wait times and prioritising consumer access via phone in the initial stages of the claims process. For some insurers, this included redeployment of senior staff, such as the executive leadership team. Once lodged, insurers provided details to claimants about next steps using one-on-one conversations, either in person or via phone, or as part of the confirmation of lodgement.

Following the events, insurers demonstrated adaptability and willingness to ensure those affected could access information in a variety of ways. This included in-person community hubs, which significantly enhanced the insurers’ ability to provide clear communication, and easily facilitate and progress claims. Brokers commented favourably on those insurers who had representatives come and sit in their offices, providing direct access to insurer workflows and status information. This collaboration with broker partners also allowed claims to be dealt with more quickly and efficiently. Other examples of expanded communication included dedicated 0800 phone numbers and messaging through social media channels such as Facebook.

Areas for improvement

Although general information regarding what to do and the claims process was provided to consumers via websites and social media platforms, feedback from some brokers indicates that the volume of information made it difficult for them to navigate, so it was likely not easy for consumers to understand.

Brokers also commented that there was not a consistent approach by insurers as to what was permitted in terms of site clean-up. The inconsistency when interacting with different insurers created flow-on confusion regarding requirements for proof of loss and formal loss assessment. If insurers were able to provide or co- ordinate a consistent approach, this may simplify the communications to brokers and consumers.

Only 43% of insurers include details in the claim confirmation about how claimants will receive progress updates. Additionally, status updates without needing to contact the insurer are only accessible to parties with direct access to repairer portals. Allowing greater access to these portals may reduce traffic to insurer contact points and delays in obtaining status updates.

Insurers noted some common areas where consumers have limited understanding of policy response:

• concepts such as:
  • gradual damage – deterioration or damage that happens over time; insurance policies are generally designed to cover damage that is sudden, accidental and unforeseen
  • pre-existing damage – damage that already exists at the time of an event
  • betterment – where replacement is to a higher standard than before the damage or loss
• that only event-related damage is included within a building repair scope
• how the Natural Hazards Commission Toka Tū Ake (NHC) (previously the Earthquake Commission or EQC) claims process works.

This is supported by comments from the DRSs that consumers have a long history of not reading policy documents or being able to understand common exclusions and cover limits. There is potential for collaboration in this space.

The DRSs also identified that claimants provided with cash settlements weren’t told about their ability to claim for further amounts, meaning some may not have received the full amount they were entitled to. We expect all communications to consumers around settlements to clearly explain all the policyholder’s entitlements.

Recommendations

• Insurers should provide claimants with a clear understanding of the claim lifecycle, what to expect throughout this process, and consistent instructions for what is expected from them. Insurers should clearly state their expectations for the provision of evidence to support a claim.
• All survey respondents agreed that consumers had limited understanding of the entitlements and requirements of the NHC. To better inform and support consumers through the claim process, insurers could provide more information on the provisions and requirements of NHC where relevant.
• Insurers should explain to claimants the roles and responsibilities of third-party providers such as loss adjustors and builders, along with the scope of their involvement in the claim. Insurers should ensure that communications to consumers from these third parties align with their own communication guidelines.
• To mitigate confusion, frustration and stress for consumers, insurers should provide better access to progress updates throughout the claim lifecycle. This could be, for example, via a client portal that can be directly accessed by consumers without needing to contact the insurer. It could also include useful information such as contact details for relevant third parties such as loss assessors/adjusters.
• Insurers should consider how policy coverage is communicated to consumers both when they purchase a policy and when they lodge a claim. This should be in plain English and could include an explanation of commonly misunderstood concepts such as excesses, betterment, the relationship between private insurance and NHC cover, and common policy exclusions.
• When consumers are provided with ‘cash settlements’ or payments, it should be clearly communicated that they may have the ability to claim further amounts.

⁸ Financial Markets Conduct Act 2013, section 446J(1)(j)

Project management and oversight

What we want to see

For the majority of claims, consumers expect insurers to manage the entire claim. This includes not just oversight of timeframes but also management and oversight of third parties appointed by the insurer. The insurer is often the claimant’s sole point of contact – of the 118,000 NIWE claims received, only 26% were facilitated through a broker. Claims management should extend to communicating with consumers about the purpose, order and timing of assessors and tradespeople who are attending to their damaged property. Insurers are ultimately responsible for ensuring the services provided by the appointed third parties meet the required level of skill and knowledge for the task that has been outsourced.

With the introduction of CoFI, those domestic fire and general insurers who are licensed financial institutions need to meet the conditions on their licence. The Standard Conditions imposed on financial institution licences include the financial institution being satisfied that an outsourced provider is capable of performing the service to the standard required to enable the financial institution to meet their market services licensee obligations.⁹

CoFI also requires that agents of a financial institution follow the procedures or processes that are necessary or desirable to support the financial institution’s compliance with the fair conduct principle.¹⁰ Additionally, the financial institution must have regard to the types of agents that are engaged to carry out work in relation to the financial institution’s relevant services or associated products, including the nature and extent of that work and of the authority of those agents.¹¹

Findings and good practice

Insurers reported increasing the frequency of operational and governance meetings to review claim status reporting, workload distribution, prioritisation, analytics, and technical issues such as silt claims and site access. Insurers monitored complaint levels and consumer feedback to pick up any trending performance concerns of appointed third parties.

Areas for improvement

Insurers retained oversight of the overall progress of claims, but did not always directly oversee aspects of the claim outsourced to third parties. Consumers don’t always understand that multiple people and third parties might be involved in their claim process – in their eyes it is always the insurer who is managing the claim.

Consumers experienced dissatisfaction due to insufficient oversight of insurer-appointed third parties. Brokers and DRSs indicated that loss assessment in particular required more oversight from insurers. Feedback identified that loss assessors were hard to get hold of, didn’t respond to enquiries and didn’t always display expert knowledge of insurer policy documents. These factors resulted in a frustrating experience for many consumers.

Recommendations

• Insurers should have adequate oversight of all third parties involved in the claim even when not directly engaged by the insurer, for example repairers. This includes ensuring loss assessors who are providing claims settlement advice to consumers are correctly applying policy provisions.
• We found that delegated claims authorities were useful for efficiently managing claims, particularly during surge periods after significant events. We recommend insurers continue to provide appropriate delegated claims authorities to intermediaries.
• During the claim lifecycle consumers may receive requests for information from multiple insurer staff and third parties. Insurers could consolidate these requests by ensuring their systems can adequately capture and manage all information from both internal and external sources.

⁹ Standard Condition 4

¹⁰ Financial Markets Conduct Act 2013, section 446J(1)(e)

¹¹ Financial Markets Conduct Act 2013, section 446J(2)(f)

¹² Consumer NZ Autumn 2024 Issue 623 article “After the Floods” by Rebecca Styles.

Consumers in vulnerable circumstances

What we want to see

Consideration of consumers that might be in vulnerable circumstances is particularly important following a significant event such as a natural disaster.

CoFI requires insurers’ FCPs to have regard to the types of consumers they deal with, including consumers in vulnerable circumstances.¹³ Insurers should have systems that can be adapted to tailor services for those in vulnerable circumstances. Staff need to be trained to identify those consumers and address their needs appropriately. The systems and training should also take into account the likely increase in the number of consumers in vulnerable circumstances following an event, due to reasons such as loss of property, evacuation, displacement, or limited ability to communicate with friends and family.

Findings and good practice

Identification and treatment of consumers in vulnerable circumstances appears to have been a high priority for insurers during the NIWE. Insurers described adapting and implementing their policies, and designating capable trained claims handlers to ensure consumers in vulnerable circumstances were prioritised.

Insurers outlined robust and comprehensive vulnerability policies, and most have further tailored their services for all consumers in vulnerable circumstances following their NIWE reviews. This included:

• door-knocking to ensure consumers in vulnerable circumstances were identified
• communication with local MPs to focus on the most damaged areas
• recognition of the need to identify consumers in vulnerable circumstances throughout the claim lifecycle.

Brokers were also satisfied with the insurer response to those in vulnerable circumstances, in particular noting:

• access to mental health services
• fast-tracked payments
• listening to brokers about individual client needs
• arranging key contacts at insurers for clients
• adapting their lodgement questions to assist in identification of consumers in vulnerable circumstances.

Areas for improvement

Feedback from brokers noted there were insurers who delayed in adapting their claims process or didn’t adapt their process for identifying consumers in vulnerable circumstances. This created situations where the financial vulnerability of some consumers was not adequately recognised.

Recommendations

• Insurers should have adequate processes for assisting consumers in vulnerable circumstances. Insurers should continue to improve these processes so consumers in vulnerable circumstances are treated fairly and not disadvantaged during severe events. This may include ensuring consumers are provided with additional support and resources as appropriate.

¹³ Financial Markets Conduct Act 2013, section 446J(2)(d)

Resourcing

What we want to see

We acknowledge the balance that is required in not being over-resourced during business-as-usual periods and having sufficient resource during a surge event. Insurers need to ensure they have the skills, resources and experience to competently provide a suitable service that meets professional standards of care.

Insurers should have catastrophe plans (CAT plans) in place to address claims surges. These plans should include strategies for both the capacity and capability of claims-handling processes and staff. We encourage insurers to share their learnings from the NIWE with each other, noting positive practices that included outsourcing arrangements and the ability to rely on offshore staff or agents.

Findings and good practice

Insurers activated CAT plans such as ‘all hands on deck’ and deployment of offshore contingency resources. One insurer’s existing business relationship in the UK allowed it to utilise the services of offshore senior staff with expertise in managing large catastrophe events. This provided valuable strategic guidance and leadership to the recovery response.

Insurers were able to call on assessing partners to activate their surge plans and utilise global capacity. One insurer was able to utilise an additional 300 staff, with approximately 50% coming from Australia, 30% from Canada and 20% from the UK. The long-distance staff were in Aotearoa for three months, with those coming from Australia rotating in and out on a three-weekly cycle.

Insurers set up dedicated teams to ensure event claims were being resourced and prioritised. Insurers adapted the claims process to move specialist experienced claims handlers into areas of specific need such as NHC claims and those involving consumers in vulnerable circumstances.

Insurers recognised the need to upskill staff and adapted existing training programmes. Slimmed-down and fast-track approaches allowed for newer staff to focus on administrative tasks and provide extra capacity for more-complex claims and faster operational uplift. These newer staff worked closely with senior claims consultants and team leaders to ensure they had the necessary support.

Areas for improvement

The reassignment of experienced claims handlers to NIWE claims was a necessary and appropriate allocation of human resources. However, broker feedback indicates that it did mean there was a negative impact on business-as-usual claims handling, where inexperienced handlers sometimes provided incorrect advice and contributed to delays.

There was a severe shortage of specialised resource in the areas of loss assessment, valuation and geotechnical expertise. Insurers should consider how these areas might be differently resourced or how expertise could be better shared across the sector.

Recommendations

• Insurers should plan how to reduce administrative burden and facilitate the allocation of trained staff into both event (e.g. NIWE) and business-as-usual claims. Insurers may want to consider reviewing claims- handling processes and systems, and prioritising any recommended technology uplift.
• Insurers should review the capacity and capability of both in-house and external loss assessors, to identify and address areas for improvement and ensure they are prepared to respond to surge volumes following severe events.

Complaints handling

What we want to see

There should be clear pathways for both internal and external dispute resolution, which are proactively communicated to consumers prior to entering and throughout the claim lifecycle, particularly if dissatisfaction is detected from the consumer. Staff should be trained to detect and respond to expressions of dissatisfaction efficiently and effectively. Insurers should have processes in place to analyse themes and trends arising from complaints, and take action to address the underlying root causes.

With the commencement of CoFI, consumer awareness of complaints processes and complaints handling will be an area of focus for the FMA. We see this as a key foundation for fair treatment for consumers and an area that requires greater consumer awareness. Insurers should consider how they can better inform consumers about their complaints resolution process, both internal and external, and how that process works.

Findings and good practice

Insurers acknowledged there were some challenges in meeting normal resolution timeframes for complaints, but most were able to be met.

Of the insurers surveyed, 70% provided frontline staff with training on how to deal with weather event- related complaints prior to the NIWE, and all issued guidance to staff subsequent to the events.

Insurers adapted their usual way of working to try to ensure consumers were receiving the best service possible. This included the creation of specialised teams to handle event complaints and supplemental training for staff. Where insurers participated in community hubs this incorporated complaints management, allowing personal and fast responses.

Technology such as sensitive word search functionality was used to identify areas of dissatisfaction. General expressions of dissatisfaction were resolved at the point of notification through empathy and explanation. One insurer empowered staff to acknowledge complaints by giving a small gift to the consumer if appropriate.

There appeared to be processes in place to escalate dissatisfaction into a formal complaint where required. Controls monitored collective feedback responses to determine whether changes to processes were required.

Areas for improvement

Several insurers shared data from their own consumer surveys. One identified that 43% of NIWE complaints were related to dissatisfaction with the speed of progress on claims. Feedback from Net Promoter Score surveys and the DRSs also identified that communication of timeframes and expectations did not meet consumers’ needs.

The more complex home claims had the highest level of dissatisfaction, due to:

• issues with timeliness and clarity of communication
• frustration with claims assessment and processing
• misunderstanding and low knowledge of NHC land cover
• confusion over claim ownership relating to multiple points of contact across the insurer, assessors, builders and other specialists
• confusion around the role of the insurer in the council land categorisation process.

Recommendations

• Insurers should continue to develop their internal processes for dealing with dissatisfaction and complaints. There should be clear pathways for consumers to raise concerns and ask questions during severe events. Insurers should engage more closely with dispute resolution schemes to ensure complaints processes are better defined for consumers.

Business continuity planning

What we want to see

At the time of the events, some insurers were already required to maintain a business continuity plan (BCP) under Standard Condition 5 of the FAP Standard Conditions. Under CoFI, this condition has been extended to all licensed insurers, who must have and maintain a BCP that is appropriate for the scale and scope of their financial institution service.

The BCP should provide for the continuity of the insurer’s services generally, not just the recovery of technology systems, and encompass any outsourcing arrangements. The BCP should consider the loss of availability of key resources including staff, records, systems, suppliers and premises. The increasing exposure of insurers to extreme weather events should be reflected in their operational arrangements.

Under the Standard Condition best practice is that the BCP to be maintained, reviewed and regularly tested – at least annually. Scenario planning is an important step in testing the effectiveness of the BCP. To avoid testing being a ‘tick box’ exercise, insurers should design scenarios that take into account the nature, size and complexity of their business and the risks they are exposed to. While it is impossible to predict all future business disruption scenarios, well-designed scenarios can significantly enhance the effectiveness of the BCP. We recommend insurers review the business continuity and technology systems findings in our Financial Advice Provider Monitoring Insights report¹⁴ for further guidance.

Findings and good practice

Most insurers already had BCPs covering the basic requirements before CoFI Standard Condition 5 became effective. Those insurers were also able to show action taken to remedy gaps in their BCPs identified as a result of the NIWE, such as:

• upgrades to CAT plans
• extended incident management plans and strengthened technology service recovery plans
• investigating the use of an external resource model to alleviate strain on business-as-usual claims
• improved communication processes
• upgrades to BCP technology
• developing major event response plans and other activation plans.

Areas for improvement

We found that some insurers do not conduct the required annual test of their BCP. While 57% of insurers indicated they had a BCP scenario specifically for severe weather events, only one reported having assessed the impact of the scenario on their business and consumers. These are two key areas to assess in a BCP test and we question what entities are assessing instead.

We found that some insurers’ BCPs did not always seem to help them effectively get through business interruptions that impact their ability to provide services. Some insurers indicated the severe weather events impacted their ability to provide services to their consumers, in either a material or limited way, but this did not trigger their BCP.

Only 43% of insurers surveyed include “reporting material incidents to the FMA” in their BCP. Licensed financial institutions are now required to notify the FMA of events that materially impact the operational resilience of their critical technology systems, so this will need to be incorporated into insurers’ processes going forward.

Recommendations

• Insurers should tailor their BCPs to ensure they can adequately respond to significant events, including severe weather events. This should include consideration of annual scenario testing, staff resourcing, outsourced providers, and how to adapt standard operating processes.
• Insurers will need to have processes in place to report material operational resilience incidents to the FMA. We will assist by raising awareness of the mandatory notification requirements and the online notification portal, and highlighting these matters in operational engagements with insurers.

¹⁴ Financial Advice Provider Monitoring Insights, p20-21 | fma.govt.nz

Other areas

Findings

DRS feedback indicated that insurers’ remediation strategies are weighted towards cash settlement rather than managed repairs. Once a cash settlement is paid, the insurer retains no oversight of the reinstatement process, and the consumer deals directly with the contractor(s). A 2020 inquiry into the Earthquake Commission as a result of the Canterbury earthquakes¹⁵ raised concerns with cash settlements, as this approach can potentially lead to a legacy of unrepaired homes due to settlements being insufficient.

The DRSs also raised concerns that some insurers were not following the prescribed options for settlement provided by their actual policy wordings. Consumers were often not aware that they were able to revisit the cash settlement if further damage or loss came to light.

Recommendations

• There should be clear parameters for quality assessments, so damage is properly assessed and scoped in a thorough, consistent and accurate manner. Insurers should consider how managed repair or rebuild programmes compare to a cash settlement model to avoid the increased risk of a legacy of unrepaired homes as seen in Canterbury.
• The CoFI regime includes the requirement to have a written FCP. FCPs should contain reference to product and service reviews, and insurers should ensure preferred settlement options are incorporated within product policy wordings to minimise any need for out-of-scope settlements.