Southerly by David Haywood

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Southerly: Tower Insurance Have Some Bad News For You

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  • giovanni tiso, in reply to webweaver,

    When I sarcastically asked if they would pay out for the full cost of replacement once the house had been bulldozed, she went away to ask an expert and came back with the same answer. No.

    This I don’t get. If the government bulldozes your house, that’s got nothing to do with the fact that the land is not insured, surely – at the end of the day disaster still befell the house. Which was insured.

    Getting a public official and a couple of lawyers to comment on this would seem the first order of business for a journalist interested in this story.

    Wellington • Since Jun 2007 • 7473 posts Report

  • stephen walker,

    if they say the land is not their problem, then make them repair the house in full. then you would have to pay for the fully reparied house to be moved. if they say, "no, we can't repair it because it's in the red zone" then they have to pay repalcement cost. it'a bluff.

    nagano • Since Nov 2006 • 646 posts Report

  • Glenn Pearce,

    Surely this won't stand up when taken to the Insurance ombudsman ?

    Won't most people be in the same situation, the cost of repair would almost always be less than the cost of rebuild ? In which case there effectively is no option B, only option A ?

    How about calling their bluff and getting them to fully repair it and then transport it elsewhere ?

    Interestingly, when we bought our old 20's bungalow 15 years ago I was told that full replacement insurance was not available for older houses (can't remember what age they specified). Then at some stage, don't recall when, they made it available for older homes so we took it up (AMI). I always wondered what sort of dust up over the *value* of the replacement would occur should the need arise.

    Regarding Option A, Key definitely said during the announcement there would be some process for disputing the 2007 valuations but it was unspecified.

    Auckland • Since Feb 2007 • 504 posts Report

  • Gee,

    So, so, so, so, so WRONG! So incredibly unfair and, well, just FREAKING WRONG!

    I really don't know what to say except that I really hope you and Jen can get them to go the right way on this. Also, I hear Close Up and Campbell Live are still looking for people to tell their stories.... Who can we yell to/at loudly for you???

    Canada, eh • Since May 2011 • 78 posts Report

  • David Haywood, in reply to Ross Mason,

    Do the Haywoods still lose on the deal???

    In this case, yes, (as Fooman says).

    Firstly because we have an old house. The book value of (just about) any old house is much less than it would cost to build that same house again. But in the event of a disaster (e.g. fire), we *would* want to rebuild our house, and that is why we spent good money to purchase total replacement insurance. By taking the option you suggest we would only get book value, and so could not afford to rebuild our existing house.

    To put it another way, if we’d have been happy with book value we would have insured the house for book value. But instead we have the case where we paid for total replacement and are being offered book value.

    Secondly, the book value in this case is taken from the rateable value. This is not worked out for individual houses, but is averaged across an area with tweaks for different house/property sizes. Our area covers the gamut from the riverside and back inland to an interior consisting of state-house streets pepper-potted with private homes. The averaging process over the whole area means that the houses inland sell for below rateable value, but the houses inland sell for significantly above rateable value.

    So for the inland houses, taking the government offer as you suggest is a great idea as they will be paid out *above* the purchase price of these homes. For houses beside the river the reverse is true.

    To give you an actual example: one of my neighbours has a three bedroom brick-and-tile house on the river. It would cost about $200,000 to build an equivalent house. But the rateable value for that house is only $56,000. So that is why he has total replacement insurance – because you can’t build another house for $56,000. And indeed, you can’t buy a house anywhere in Christchurch for that price.

    Hope this clarifies things…

    Dunsandel • Since Nov 2006 • 1156 posts Report

  • Annon_sorry,

    My heart just sank when I read about your experience with Tower. It is exactly what they did to us. We had a large slip 2 winters ago on our lifestyle block near Auckland. Our house was not damaged but the EQC said we had to move our house away from the pressure cracks. EQC paid a portion, but not enough to cover the cost of moving the house and rebuilding the bottom floor (concrete slab). Our Tower policy covered top up for land slips. But they argued that since there was no actual damage to the house and no “government official” told us to move the house, they were not required to pay top up. It took us two years of stress and BS plus lawyer fees to get even a small payment from them. All told, we are still without a portion of the house (my front door opens to a drop of 4 meters) and lost a significant amount of money in the process. Plus we are not allowed to talk about the agreement because “technically” they did not pay top up.
    I can strongly encourage everyone out there to not give Tower your money because they will screw you if they can.
    So sorry you are experiencing this.

    New Zealand • Since Jun 2011 • 2 posts Report

  • Kris V,

    Not good news David... all I hear about lately is how insurance companies are seemingly weaseling out of what people thought they had paid for.

    I can't say that AMI have proven to be any better. Despite never having any land damage, being out of our house since September and even after being fully paid out by EQC in November last year, we are still waiting for AMI to tell us our house is coming down.

    Nothing is happening very quickly round here, and I have friends in both red and green zones who are upset with the classification.

    Actually, I take that back already. The only quick process recently was the one in which my hubby lost his job. Cheers Vbase. Luv your work almost as much as I luv AMI.

    Shakeytown • Since Nov 2008 • 61 posts Report

  • stephen walker,

    so the conclusion is, insurance policies that have higher premiums for extra cover are mostly a scam. fascinating.

    and i feel very sorry that you have been dealt this one, David. best of luck in getting the buggers to honour their policy.

    nagano • Since Nov 2006 • 646 posts Report

  • Kumara Republic,

    Just as well I switched from Tower to Vero after my bank broke off its partnership with the former.

    The way things are going, Cantabrians are being made to feel like refugees in their own country.

    The southernmost capital … • Since Nov 2006 • 5446 posts Report

  • Fooman, in reply to webweaver,

    When I pushed the point and asked how on a practical level it is possible for them to claim that a house can be repaired when the land beneath it is no longer deemed liveable

    The price of skyhooks has come down, obviously.


    Lower Hutt • Since Dec 2009 • 87 posts Report

  • Fooman, in reply to webweaver,

    she told me that it wasn’t the insurance company’s problem – because they don’t insure the land.

    As menttioned briefly upthread, I think the banks would have a major problem with this, as it would effectively reduce the value of their assets (mortgages over house+land) by a considerable amount.

    (Addition: As insurance is required to get a mortgage, perhaps the asset list should be house+land+insurance policy)


    Lower Hutt • Since Dec 2009 • 87 posts Report

  • Glenn Pearce,

    Surely the council won't consent/sign off any repairs to houses in the red zone?

    Therefore tower cannot fufil their obligation to repair so they must replace?

    Auckland • Since Feb 2007 • 504 posts Report

  • linger, in reply to Fooman,

    Regrettably, banks may have no problem at all, once a mortgage agreement has been signed – at least, up to the point where the mortgagee defaults – because the value of a mortgage to a bank is not the value of the property mortgaged, but rather the value of the income the bank can get from the loan. Until that point of default is reached, the bank still gets their money on a regular basis, and so has no reason to complain. (Short term “thinking”, I know.)

    Tokyo • Since Apr 2007 • 1944 posts Report

  • Anonymous Coward,

    I'll chime in with my own Tower sob story from a few months back - apparently if your carpet is glued to the floor, it's covered by the policy, if it's tacked it counted as a chattel (and not covered).

    I am (yet another) person on this thread who will not be signing a renewal with Tower next year.

    Wgtn • Since Apr 2008 • 6 posts Report

  • Fooman, in reply to linger,

    As the secuirty in the loan drops, the risks to the banks increase. Things like that are noticed by credit ranking agencies, moreso these days. Banks don't like their credit ratings to drop. Makes business more expensive.


    Lower Hutt • Since Dec 2009 • 87 posts Report

  • Sacha, in reply to linger,

    banks may have no problem at all

    Unlike Chch homeowners, you can guarantee they've been consulted about this decision.

    Ak • Since May 2008 • 19745 posts Report

  • stephen walker, in reply to Glenn Pearce,

    that's what i mean by a bluff. surely they have to, under the policy, either repair the house to its original state or pay the full replacement cost. if they refuse to repair it, they are in breach of the policy, no?

    nagano • Since Nov 2006 • 646 posts Report

  • linger, in reply to Fooman,

    Sure; but that feedback loop takes time to operate.
    (For example, it won't be immediately obvious to credit rating agencies how much exposure any given Australian-owned bank has in Christchurch.)

    Tokyo • Since Apr 2007 • 1944 posts Report

  • Sara Bee, in reply to Che Tibby,

    It's like Neville Chamberlain!

    Dunedin • Since Nov 2006 • 67 posts Report

  • Lucy Telfar Barnard,

    So, how about... you get Tower to pay out the $200K to repair. That means they've got to find a way to fix the house on its current site. If they can't, then as others have noted you can invoke the total replacement clause. But if they somehow can, then you continue living in it. When the government come to bulldoze it (because it's in the red zone), you refuse permission (because you can't be seen to allow the bulldozing or that would void your policy). The government bulldoze it anyway, because that's what they'll do. Then Tower have to pay out full replacement value (just as they would if some student went on a rampage with a bulldozer and knocked your house down) AS WELL as already having paid to repair it. That would be very satisfying.

    Wellington • Since Nov 2006 • 585 posts Report

  • Nades,

    Thanks for writing this article, I got straight on the phone to AMI and yep they are exactly the same as Tower. When the girl told me they would pay the value of my repairs only if we took option B I was pretty angry. I got her to confirm that they would actually pay the $20 grand or so to repair my home when I would no longer be able to live in it as I was in the red zone and would have to leave and she said yes they would!! Tempted to make them fix it only then they reduce any payout by that amount so not really worth the effort and cost involved. Went to the community briefing here this evening and the insurance rep there confirmed that this would be same/similar for all insurance companies. Sooo, there will be loads of us in this boat, many are likely to be extremely unaware at the moment. I've posted this on Facebook tonight and its gone pretty viral amongst my friends etc. We are going to try and appeal our 'Red zone' label, if not then I guess we have a fight on our hands to try and get a good result. We also have a lovely unique riverside property and love where we live. Our house is ok, our land is ok as well, we haven't had so much as a teaspoon of liquefaction and share a boundary with a 'green' property. Good luck to anyone in this situation, it really sucks!

    Christchurch • Since Jun 2011 • 1 posts Report

  • stephen walker, in reply to Nades,

    that is really awful, Nades. seriously. i hope you fight it all the way and are successful.

    i still don't understand how they can reduce your payout if they repair it. if CERA then bulldozers it, then why do they not have to replace it in full? you haven't signed a policy with CERA, you signed it with the insurance company. how can they just reneg on it? is there a law that has nullified your cover under the original policy?

    nagano • Since Nov 2006 • 646 posts Report

  • Lucy Telfar Barnard,

    Sorry, quick question: you say "the rateable value of the land is $80,000 less than that assessed by a registered valuer when we purchased the property". But when it comes to payment under option A, the value of the land doens't really matter , it's the value of the total (CV) that's important.

    Wellington • Since Nov 2006 • 585 posts Report

  • Sacha, in reply to stephen walker,

    how can they just reneg on it? is there a law that has nullified your cover under the original policy?

    Would be part of the lengthy closed-doors negotiations led by Brownlee, Joyce, English, Key and chums. Demand answers there.

    Ak • Since May 2008 • 19745 posts Report

  • nzlemming, in reply to webweaver,

    She thinks it will be the same attitude across the board with all insurance companies.

    Don't we call that collusion?

    Waikanae • Since Nov 2006 • 2937 posts Report

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