My heart goes out to the residents of Christchurch

I was upset to hear that Christchurch has been hit by yet another significant earthquake today, 25th May at 2.44pm. This time it was rated at 4.7 with a magnitude, although first reports had it at 5.2. The location was 43.494°S, 172.964°E at a depth of 8.8 kilometres. Thankfully, no injuries were reported and damage was minimal. People, however, were frightened and reports say many ran into the streets.

Earthquakes are cruel in that the aftershocks continue on for some time afterwards, and, in the case of Christchurch, new earthquakes also occurred. Unlike a tornado or cyclone or even a bush fire, which once passed usually leaves people to immediately start to recover mentally and start the repair/reinstatement process, earthquakes can often rear their ugly head time and time again.

For Christchurch and the greater Canterbury area, it has been going on for far too long since the initial was a 7.1 magnitude earthquake struck the South Island of New Zealand at 4:35 am on 4 September 2010, more than 18 months ago.  At the time of my posting this blog there has been a staggering 10,423 aftershocks/new earthquakes in the region. (Source: University of Canterbury’s Digital Media Group, Christchurch, New Zealand). This is much more than anyone should have to put up with.

The other issue about earthquakes that I was going to mention in my post earlier this week about the Italian earthquake (but got called to my plane before I could finish it) is that the damage can often be so severe that the foundations of the building are damaged along with much of the rest of the building. It may be so badly affected coupled with the threat of further shakes that even undamaged contents and or stock have to be abandoned.

In such cases, it is rare, for me or one of the LMI team, to find an insured with enough sum insured to reinstate the lost assets while the indemnity period on the business interruption policy is simply not long enough. The indemnity period in particular is a real problem in New Zealand as there is insufficient capacity for the insurance industry to underwrite the risk.

I put the issue of under-insurance down to two main factors. The “It will never happen to me!” syndrome which I know some people follow. The other more insidious cause is the high level of taxation. In New Zealand, like Victoria, New South Wales and Tasmania, they have a Fire Service Levy on insurance premiums. This pushes up the price and people buy less insurance. This is the basic principle of economics. I really wish governments would wake up to the damage this does to people’s lives and the economy as a whole. Regretably, it has not been addressed by the New Zealand Government.

Those of us that live in Australia think that we are immune to this peril with the earthquakes only hitting our near neighbours of Indonesia, Papua New Guinea, Solomon Islands, Vanuatu and New Zealand. The truth of the matter is that Australia can and does have earthquakes over magnitude 5. Since the terrible Newcastle earthquake on 28 December 1989, there have been 20.

None of us know when we may need to call on our insurance policy or to what peril it may be responding. My personal mantra on this is hope for the best but plan and insure for the worst. It lets me sleep at night.

I just hope that the aftershocks soon stop for those in and around Christchurch and life returns to normal as quickly as possible.

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