Outgoing Insurance Council of New Zealand chief Tim Grafton bows out after a turbulent but satisfying decade in charge

By John Deex

When Tim Grafton was offered the chief executive’s position at the Insurance Council of New Zealand (ICNZ) in 2012, the industry was still grappling with the aftermath of the devastating 2010/11 Canterbury earthquakes.

The unprecedented event and multi-sector response was highly complex and Mr Grafton, a former journalist and political adviser with limited insurance experience, could have been forgiven for passing up the opportunity.

But he was attracted by the scale of the challenge, and the ICNZ board wanted someone who could bring a fresh perspective to industry affairs.

The Canterbury earthquake sequence dwarfs all New Zealand disasters, and at the time it was the fourth most expensive insured natural disaster to have occurred across the globe.

In the Christchurch quake of February 22 2011, 185 people were killed. More than 650,000 insurance claims have been made as a result of the quakes, with more than 168,000 of these with private insurers. To date, the combined events have cost private insurers more than $NZ21 billion, and the government insurer Toka Tu Ake EQC has paid a further $NZ10 billion.

The claims process was messy, with communication a minefield for consumers who needed to liaise with their insurer and an overloaded EQC.

Claims first needed to be lodged with the EQC, which would investigate and pay out up to its cap, then transfer any over-cap claims to private insurers. This process was notoriously slow, and there was also a raft of complicated legal issues to resolve.

But as Mr Grafton gets set to leave ICNZ in April, he counts the reforms sparked by the earthquakes among his and the industry’s greatest achievements.

It was clear that change to the process was needed, and when the Kaikoura earthquake hit in 2016, the EQC and private insurers launched a new partnership model. The insurers acted as EQC agents, investigating and paying out claims for their customers directly. Private insurers were then reimbursed for the under-cap portion of all the claims they managed.

The model worked much more efficiently, and it has now been expanded so that any insured person whose home or land is damaged in a natural disaster can lodge the claim through their private insurer.

While Mr Grafton joined shortly after a record earthquake event, he’s leaving not long after two record weather events.

Last year’s Auckland flooding in January and Cyclone Gabrielle in February resulted in a staggering 115,353 claims valued at $NZ3.6 billion. To put this into context, the previous annual record (2022) for extreme weather general insurance claims was $NZ351.22 million.

While the extent of the damage has again put insurer systems and processes under pressure, the reforms appear to be working. Claims settlement rates are even better than Kaikoura, with 87% fully settled by December.

“When I was appointed, the board at the time was looking for somebody who would provide a fresh perspective on things,” Mr Grafton tells Insurance News.

“Not necessarily somebody who was very familiar with the industry, but someone who could provide an outside-in view of the sector.

“As the aftermath of the Canterbury earthquakes and recovery efforts were unfolding, I was able to come in with a viewpoint that was very much looking at the customer – how our sector was supporting the customer at the time, and how we could do that better in future.

“Looking back over the past several years, we do have a much, much, better approach to responding to natural catastrophes.”

If there was another earthquake series on a similar scale to Canterbury, Mr Grafton is convinced “things would move very much more smoothly”.

“There’s no doubt about that. And I think that’s really important for the narrative from New Zealand to the reinsurance markets.”

Like the Canterbury quakes, the floods will have a lasting impact, but Mr Grafton says a “cross-sectoral” response is needed as the new National Party-led coalition government beds in.

“There’s certainly been a lot of work done on issues like ‘managed retreat’, and we’ve made our views known on the need for much greater resilience to reduce the risk from flood,” Mr Grafton says.

“The real question is, how can the private insurance sector, other sectors and government work together, so that we have sensible solutions that address risk, to support sustainable, affordable insurance?”

Mr Grafton says the council and its board want to see people well insured for the risks that they face “and be able to afford that, without dropping the cover that they need”.

“I don’t think that’s beyond the realms of possibility, but it does take a cross-sectoral approach to address that in a substantial way.”

Development on floodplains, for example, should be restricted, new buildings should be high-performing and resilient, and scientific data should be more freely available.

“It’s complex, it’s challenging, but climate change is not going to go away.”
Despite the unprecedented catastrophes and associated challenges, Mr Grafton looks back on his tenure without regret.

He’s proud of improvements to natural disaster response, work done on protection gaps and climate scenarios, and his involvement in the industry globally as Vice President of the Global Federation of Insurance Associations.

“Insurance does a power of good and is a huge benefit to society in so many different ways,” Mr Grafton says. “So for me it’s been awesome – it’s been a wonderful journey.”

From politics to insurance

Former New Zealand cabinet minister Kris Faafoi, 47, has been appointed to take over as ICNZ Chief Executive from April 7. Like Mr Grafton, he’s a former journalist and has a strong background in politics.

A highly regarded senior member of the parliamentary Labour Party, Mr Faafoi worked as a journalist for the New Zealand Broadcasting Corporation and BBC before being elected in 2010.

He last served as the country’s minister for justice until he resigned from parliament in 2022. He also served as minister for broadcasting, communications and digital media, government digital services, commerce and consumer affairs, and immigration, and was also the associate housing minister.

Mr Grafton says he has every confidence in Mr Faafoi. “Needing to be a voice on behalf of the sector does require you to be accessible to the media, so media experience is certainly a plus.

“And obviously the role involves dealing with government on many different sorts of issues. It’s important to understand how the machinery of government works, and also the political environment.

“So coming from that career path does make a lot of sense.”