IAG joins Net-Zero Insurance Alliance

IAG has joined the United Nationsconvened Net-Zero Insurance Alliance as part of its overall commitment to achieving net zero. The insurer joins 28 other leading insurance companies worldwide, representing just under 15 per cent of the world’s premium volume. NZIA members aim to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum global temperature rise of 1.5°C above preindustrial levels by 2100, in alignment with the Paris Agreement on Climate Change.

IAG New Zealand CEO Amanda Whiting said: “As New Zealand’s largest general insurer, with a relationship with one in every two New Zealand households, we see firsthand the impact of climate change through changing weather patterns and weather events on our customers and their communities. “As a business, we are committed to reaching net zero by 2050. We are excited to join the Net-Zero Insurance Alliance and be involved in developing the methodologies and strategies to achieve this through our underwriting portfolio and work towards a net-zero future.” The move follows the Driving to Zero focus area outlined in IAG’s Climate and Disaster Resilience Action Plan. The insurer committed to using its underwriting and investment approach to drive net-zero emissions.

IAG has a target of achieving net-zero emissions by 2050 across its value chain, with an intermediate target of a 50% reduction in emissions by 2030. As no methodology currently exists to measure and disclose net zero Scope 3 emissions relating to customers’ insured assets, by participating in the NZIA, IAG will work with the world’s leading insurers to develop industry-appropriate methodologies and strategies to support a just transition to net zero.

IAG has been a carbon neutral business in relation to its Scope 1 and 2 emissions since 2012, and it has intermediate targets to align its investment portfolio to net-zero emissions by 2050.

Better cover available

Rai* owns three rental properties, and in 2014 he engaged an insurance adviser (broker) to help him get the right cover for his needs. Rai’s broker advised him to take out home insurance policies, with additional landlord’s cover, for each of his properties. The policies renewed each year, and Rai’s broker sent him his new policy schedule and policy wording annually. Changes to methamphetamine cover

In 2016 Rai asked his broker if he was covered for methamphetamine contamination because he noticed that this kind of damage was becoming more common in New Zealand.

Rai’s broker advised him that there wasn’t specific cover for damage caused by methamphetamine contamination under his policies, but that this type of damage would be covered in line with his policy terms.

In 2018, Rai’s insurer made some changes to their home insurance policy, including introducing specific cover for methamphetamine damage. Then in 2019, the insurer updated the policy terms again and added a new testing level threshold for methamphetamine contamination cover. Rai’s broker didn’t speak to him about the changes to the methamphetamine cover, but he sent Rai a document that explained the changes alongside a copy of the new policy wording. The claim

In 2020, Rai had a property tested for methamphetamine contamination after his tenants moved out. The testing showed methamphetamine contamination in a few different areas of the house. Rai arranged for the property to be decontaminated, and he re-carpeted and re-painted the entire house.

Rai contacted his broker to make a claim for the damage caused by the methamphetamine contamination. Rai submitted a number of invoices for the methamphetamine testing and decontamination work, as well as for other property maintenance/renovation work he had done. The total amount Rai wanted to claim was $20,000.

Rai’s broker advised him that the methamphetamine contamination level at his property didn’t meet the required testing level specified in his policy, so the claim for the testing and decontamination work would not be covered.

Rai was unhappy that his claim wasn’t covered. He thought his broker had been negligent in recommending a policy with a high methamphetamine contamination level threshold, so Rai complained to FSCL. Dispute

recommendation was inappropriate because there were other policies available in the market that had better methamphetamine cover (which would have covered his claim).

The broker didn’t think he’d done anything wrong. He said that Rai’s policy wording described the details of the methamphetamine cover, and he had sent Rai a document that explained the changes the insurer made to the methamphetamine cover in 2019. Review

FSCL reviewed all the correspondence between Rai and his broker and saw Rai’s email from 2016 asking his broker about methamphetamine cover, and found that the broker’s advice at that time was correct – there was no specific ‘methamphetamine cover’ in Rai’s policy.

Rai’s insurer changed their policy requirements for methamphetamine-related claims in 2018 and again in 2019. In 2019 when Rai’s policy renewed, his broker sent him a policy schedule which referred to an out-of-date policy wording.

FSCL noted that Rai’s broker didn’t speak to Rai about the changes to his cover, but he did send him a ‘summary of changes’ document which explained the new methamphetamine testing level requirement.

FSCL thought that because Rai had raised concerns with his broker about methamphetamine damage in 2016, showing that he was particularly concerned to have cover for methamphetamine damage, and the broker had sent Rai a link to the incorrect policy wording in 2019, the broker should be responsible for covering some of Rai’s claim for methamphetamine damage.

FSCL didn’t think the broker should cover the full cost of the claim, because Rai had received a copy of the new policy wording and a separate document that described the new methamphetamine testing level requirements.

FSCL considered it was most likely that Rai would have chosen a different policy (which had a lower testing threshold for methamphetamine contamination) if his broker had discussed the insurer’s policy changes with him. Rai had a home insurance policy with a different insurer for one of his other properties, and FSCL considered he would likely have taken out a policy with that same insurer for his contaminated property.

FSCL assessed how Rai’s claim would have been treated under the terms of the alternative policy. It found that some of the costs Rai claimed wouldn’t have been covered under the alternative policy and explained this to Rai.

Once FSCL was satisfied with its assessment of the costs that Rai would have been covered for under the alternative policy, it decided that his broker should pay 50% – which came to $3,000. It felt that a 50/50 split reflected the contribution to the loss by both Rai and the broker. Resolution

Rai rejected FSCL’s final recommendation, which means it is not binding on his broker. Rai is free to pursue his complaint via other channels, such as court action, if he wishes.

INSIGHTS FOR CONSUMERS AND PARTICIPANTS

There are a variety of home insurance policies available in the market, so after considering the types of risks they are wanting to insure, a consumer could benefit from comparing cover between different insurers. Some consumers may wish to seek expert advice from an insurance adviser if they have complex needs or are finding the different policies difficult to understand. For landlords in particular, damage caused by methamphetamine contamination may be something they want to be insured for. In New Zealand, there are two sources of information which have different views about what level of contamination creates a health risk – which means that insurers follow one of the two standards. When looking at taking out a policy, it is a good idea for a policyholder to check which contamination standard the insurer uses, so that they are aware of the level of coverage they will have. This case also highlights the importance of an adviser’s record-keeping obligation and understanding of their clients’ needs. Rai’s broker ought to have known that Rai was concerned about methamphetamine cover because he had raised this in the past. When Rai’s insurer made changes to their methamphetamine cover, it would have been best practice for the broker to speak with Rai. Explaining the changes and giving alternative options would have allowed Rai the opportunity to decide whether he was still happy with his policy.

PI insurance gap dispute

Marge* is a physio with professional indemnity insurance. In December 2021 Marge’s insurer advised that they would not be renewing her insurance policy when the policy expired the following March.

In June 2022 Marge learned that a former patient had complained to the Health and Disability Commissioner about treatment given at an appointment in February 2022, before her policy was cancelled. Marge contacted her former insurer immediately, but the insurer declined to even consider Marge’s claim saying that cover ceased when the policy expired in March.

When Marge and the insurer were unable to agree, Marge complained to FSCL. Dispute

would be complaining about events that occurred in the past. Marge believed that even though her policy term had expired, the policy would respond to events that occurred when the policy had been in place.

Marge was very concerned that she, and other medical professionals, might not realise that although they thought they had cover, once the policy expired, they would be uninsured.

The insurer replied that Marge’s policy was a ‘claims made and notified’ policy. The insurer had agreed to indemnify Marge for a claim made during the period of insurance, which was defined as starting at the beginning of the day specified in the insurance schedule and ending at the end of the day specified in the schedule.

Although the event Marge was complaining about occurred in February, she did not notify the insurer of the

INSIGHTS FOR CONSUMERS

Your insurer is only obliged to cover your loss if it is covered by the policy wording. It is important that you read your policy wording to understand the extent of your cover. Those with professional indemnity insurance may like to pay particular attention to what will happen to claims arising or being notified after the policy expires.

claim until June, after the policy expiry date in April. The insurer said they had no obligation to consider Marge’s claim. Review

During FSCL’s review it became clear that everyone, including Marge, agreed the policy did not cover Marge’s loss. Marge’s relationship with her insurer was contractual, so any obligation the insurer had to cover her loss was based on the policy wording. The policy clearly stated that there would only be cover during the period of insurance and, unless the policy was renewed, the policy would cease absolutely on the expiry date specified on the insurance schedule.

However, Marge said that her complaint was really that the policy was not fit for purpose. Marge explained that it will always be after a consultation that a complaint will be lodged, and, without continuous cover, it was inevitable that, despite having insurance in place at the time the event giving rise to the claim occurred, the medical professional will be left uninsured.

FSCL could see that Marge was in a difficult position, however it did not agree that the ‘claims made and notified’ policy was inappropriate. It was the policy she had chosen and paid for. FSCL could not re-write the policy terms to provide cover for those affected by the insurer’s decision not to renew a policy. Resolution

It was FSCL’s final decision that, under the policy wording, the insurer was entitled to decline to consider Marge’s claim. While FSCL acknowledged Marge’s concerns about the gap in cover, it could not see that this was a matter for the insurer to resolve.

“Smashed up” AirBnB claim sparks complaint

Aman whose property was “smashed up” by a paying guest was further upset when his insurer applied multiple excesses and provided no loss of rent payment under a landlord’s house insurance policy. In his complaint to the IFSO Scheme, Mr A said he was forced to accept the claim settlement and said he felt “bullied” into agreeing to 4 separate excesses for each of the 4 rooms damaged, even though it was one event and the damage occurred over one night.

Mr A held insurance on his property that he rented out to AirBnB guests. In April 2021, he made a claim for damage to the property, which was caused deliberately by a guest. He told the insurer that “a guest who turned out to be some sort of criminal, smashed the place up one night while drunk”.

The insurer accepted the claim. However, a dispute arose with Mr A about the 4 excesses applied of $500 for each of the 4 rooms in which the damage occurred. The insurer offered $7,504.44 in settlement of the claim, rather than the $22,500 he expected for the cost to repair the damage less one excess and 8 months’ loss of rent. The insurer said it had no obligation to pay loss of rent, because it didn’t know Mr A was renting rooms of the house out to paying guests through AirBnB, which would have needed a commercial policy.

Having reviewed the file, the IFSO Scheme believed Mr A’s version of how the damage occurred was consistent with the damage described by the loss adjuster. However, as the damage was caused deliberately, an additional excess of $500 also applied, so there was a total excess payable of $1,000.

Following the IFSO Scheme’s discussions with the insurer, it accepted that there were unreasonable delays in settling the claim. Therefore, it offered to settle the claim for an additional $3,484, reversing the application of multiple excesses and making a goodwill payment. Mr A agreed to accept this amount in full and final settlement of the claim and the complaint.