The insurance company, Tower, has strongly criticised the time it's taking to settle Canterbury earthquake claims and says the insurance system for handling such disasters is broken.
We examine the role of business interruption insurance in business recovery following the Christchurch earthquake in 2011 in the short- and medium-term. In the short-term analysis, we ask whether insurance increases the likelihood of business survival in the aftermath of a disaster. We find only weak evidence that those firms that had incurred damage, but were covered by business interruption insurance, had higher likelihood of survival post-quake compared with those firms that did not have insurance. This absence of evidence may reflect the high degree of uncertainty in the months following the 2011 earthquake and the multiplicity of severe aftershocks. For the medium-term, our results show a more explicit role for insurance in the aftermath of a disaster. Firms with business interruption insurance have a higher probability of increasing productivity and improved performance following a catastrophe. Furthermore, our results show that those organisations that receive prompt and full payments of their claims have a better recovery, in terms of profitability and a subjective ‘”better off” measure’ than those that had protracted or inadequate claim payments (less than 80% of the claim paid within 2.5 years). Interestingly, the latter group does worse than those organisations that had damage but no insurance coverage. This analysis strongly indicates the importance not only of good insurance coverage, but of an insurance system that also delivers prompt claim payments. As a first paper attempting to empirically identify a causal effect of insurance on business recovery, we also emphasize some caveats to our analysis.
There has not been substantial research conducted in the area of fraud and natural disasters. Therefore, this study sought to examine the perceptions of Canterbury residents toward the recovery process following the September 2010 and February 2011 earthquakes and whether residents felt as though contractor fraud occurs in Canterbury. A questionnaire was developed to gauge information about Canterbury residents’ self-reports involving the earthquakes, specific contractors involved, parties involved with the recovery process in general, and demographic information. Participants included a total of 213 residents from the Canterbury region who had been involved with contractors and/or insurance companies due to the recovery process. Results indicated that a high percentage of the participants were not satisfied with the recovery process and that almost half of the participants reported feeling scammed by contractors in Canterbury after the 2010 and 2011 earthquakes. Moreover, the results indicate that participants neither agreed with the assessments made about their property losses nor the plans made to recover their properties. In many cases, participants felt pressured and even reluctant to accept these assessments and/or plans. The present study does not seek to explain why contractor fraud exists or what motivates scammers. Conversely, it attempts to demonstrate the perceptions of contractor fraud and satisfaction that have taken place in the aftermath of the Canterbury earthquakes.