Feature

It was the bombshell report that all but wiped out the lucrative methamphetamine-testing industry.

And now, more than 12 months later, the findings of the Gluckman Report may finally be starting to change the insurance industry, with indications pointing towards a new approach in how the big insurers will cover meth contamination.

The report by Gluckman and Anne Bardsley found that New Zealand authorities had made a "leap in logic" setting methamphetamine contamination standards. In short, a standard based on what "clan labs" should be cleaned to in Australia was now being used as a trigger to start cleaning in New Zealand, despite no real health risk at that level.

That standard was NZS 8510.

It is still the official standard in force and says that high-use areas with a level of more than 1.5 micrograms per square metre should be regarded as contaminated, whether that contamination came from methamphetamine being smoked in a house or manufactured.

Bardsley and Gluckman said in their report the standard was out by a factor of at least 10.

In a house where methamphetamine  had only been consumed, contamination would have to hit 15 micrograms per square metre before it needed to trigger a clean-up, the report said.

The report had an immediate impact.

Housing New Zealand was the first to react, quickly deciding to accept 15 micrograms per 100cm2, or the “Gluckman standard” as it became known.

Then, following on from Housing NZ’s lead, the Tenancy Tribunal also adopted the new standard.

“One of the difficulties for us is if you have the biggest player in town going with 15 as the standard it becomes very difficult for us to say to you guys you’re not Housing New Zealand so we are going to apply NZS (1.5 micrograms per 100cm2) to you,” Tenancy Tribunal chief adjudicator Melissa Poole said at the time.

“We have taken a pre-emptive step and say ‘okay, from the date the Gluckman report was released we will accept 15 as the standard’.”

The release of the Gluckman report also caught the attention of insurers, who had been seeing a rise in payouts due to methamphetamine contamination claims. In theory, insurers stand to save millions each year if the Government follows the advice of the report and increases the level of methamphetamine residue that needs to be found in a property for decontamination to be warranted.

The insurance industry had already began responding to what was seen as an escalating meth problem as far back as 2016 and 2017. Then, IAG, Vero, AA Insurance and Tower all changed their policy wordings. 

Changes included capping cover for methamphetamine contamination, increasing excesses for meth claims, being more prescriptive around
what landlords have to do to qualify for cover, and excluding cover from some policies.

The big question now will be whether to review the way it treats methamphetamine contamination further to Gluckman’s report.

Tim Grafton, chief executive of the Insurance Council of NZ (ICNZ) says insurers continue to follow the processes laid out in the customers’ policies for investigation and resolution of any claims relating to methamphetamine.

“For many insurers,” says Grafton, “this involves referring to the New Zealand standard.”

But that may soon change, he says.

“We are aware that some insurers have begun investigating or moving towards the Gluckman report’s recommendations. 

“It is up to each insurer to decide how the over and manage claims relating to methamphetamine based on their appetite for risk in that area.”

For New Zealand’s biggest insurer IAG, that means sticking with the NZ Standard 8510 – for now at least.

“We’re conscious of doing the right thing by our customers which is why methamphetamine contamination continues to be covered under IAG home policies,” says IAG New Zealand’s Brendan McGillicuddy, manager home and contents.  “This is in line with the NZ Standard 8510.” 

The insurer says, however, that it will be taking a keen interest in the Government’s planned changes to the Residential Tenancies Act in the wake of the Gluckman report. 

“This is because changes will follow a rigorous review process and provide clarity and certainty over meth contamination for our customers who own rental homes,” McGillicuddy says.

“We do not want to pre-empt changes to our policy coverage until there is greater clarity on this matter.”

In 2017, IAG revealed that it forked out $14 million a year for methamphetamine claims at residential properties with claim numbers varying from 40 to 80 each month. The majority of claims related to methamphetamine use, with the average claim cost for methamphetamine contamination sitting at a hefty $20,000.

Vero, the country’s second-largest insurer, would likely have been seeing similar payouts, so it is of little surprise that the insurer expresses misgivings about NZS 8510.

Sacha Cowlrick, Vero’s executive manager consumer insurance, says the Gluckman report provided “very strong evidence” that the previous standards (NZS 8510) for meth remediation were “unnecessarily low”. 

“The report indicates that contamination is not normally dangerous unless there has been manufacturing of methamphetamine, which usually creates contamination at much higher levels that we are currently covering (around 30 micrograms per 100cm2 rather than the current level of 1.5 micrograms),” says Cowlrick.

“Vero wants to ensure that we provide appropriate levels of cover to those customers whose health and wellbeing are most at risk due to meth contamination damage. We also want to reduce unnecessary claims and the associated premium costs for our customers.”

From July 1, Vero introduced changes to its residential policies that make cover for meth contamination available to customers if the amount present is greater than 15 micrograms, which is the level recommended by the Gluckman Report, and adopted by Housing NZ and the Tenancy Tribunal. 

“At the same time, we are increasing the amount of cover available to customers whose claims are accepted,” Cowlrick says. 

“We will also be moving our rural and commercial policies to this level over time.”

Tower has so far not given an indication of whether it is considering adopting the Gluckman standard, but has in the past called on the government to take action in response to the report on the management of methamphetamine testing and decontamination.

In 2018, Tower chief executive officer Richard Harding said the insurer had long maintained the position that meth testing and remediation protocols were never based on science.

“It is pleasing to see an evidence-based, scientific report into an issue that has been surrounded by and built on speculation and unfounded fears,” Harding noted. “Remediation of methamphetamine contamination has contributed to unnecessary costs being borne by our customers through higher premiums.

“We believe that landlords and tenants should not have to unfairly pay for unfounded risks, and we will pass on any benefits from a change to the Ministry of Health guidelines to customers,” he added.

Tower’s current policies linked to the Ministry of Health guidelines remain unchanged. Customers remain covered under the terms of their existing policies for contamination at the standards currently set, the insurer said.

For Andrew King, NZ Property Investors Association executive director, any moves insurers make to adopt the Gluckman standard would be welcome. 

King was on the NZ Standards Meth Committee and says it was clear to him that the levels of methamphetamine that we were previously considering as a problem were “far too conservative”.

“So, I was pleased with the Gluckman report,” King says. 

“The issue of methamphetamine is conflicting because the use of meth as a recreational drug is clearly having a devastating effect on many peoples’ lives. 

“However, the level of methamphetamine that users are consuming is extremely high and I also think that the word ‘contaminated’ was properly understood by the general public.” 

The fact that Gluckman couldn't find any evidence of any hospital admissions for methamphetamine -related illnesses anywhere in the world from residual meth in a property was also very telling, King says.

“So, I think the Gluckman report was very good and it brought a level of common sense and understanding to the meth situation.”      

The NZPIF recommends rental property providers have insurance that provides cover for tenants’ malicious damage.

“This covers many different situations, including methamphetamine contamination and we have a relationship with a specialty landlord insurance provider that provides this cover at a discounted price for our members to encourage them to have the right cover.”

One issue still remains, says King, and that is that many people, including tenants and home buyers, are still concerned about residual methamphetamine in a property. 

 “Without good knowledge of the facts, it is difficult for some people to comprehend that something they thought or were led to believe was a real and present danger to health at 0.5 micrograms now isn't considered a problem until 30 times this amount,” King says. “I can understand this, which is why the NZPIF believes that Government should embark on a public awareness campaign to educate people.”  

There is also some confusion as to whether rental property providers still need to conduct testing for methamphetamine, King says. 

“While the Gluckman report said that levels of 15 micrograms of methamphetamine is acceptable if it had solely been consumed in a property, the report still said that if meth had been manufactured in a property then the clean-up level should remain at 1.5 micrograms and cleaning a property to 15 micrograms is considerably cheaper than 0.5 micrograms. 

“This means that a landlord would still need insurance for a methamphetamine clean-up when manufacture is suspected or confirmed.”

There is currently no legal requirement for landlords to hold insurance in order to let out a property, however MBIE strongly recommends that both landlords and tenants be adequately insured against any damages, and they are advised to thoroughly check what each policy covers. 

The Insurance Council is on the record as being a champion of the Gluckman Report.

Upon the report’s release in 2018, the council welcomed its findings, describing them as a “clear and strong analysis” of the issue.

“It is refreshing to see well-informed objective research that shines a light on a problem that has caused confusion,” Grafton said at the time. “There has been a lot of scare-mongering and uncertainty for tenants, landlords and insurers.”

Grafton said the clean-up Standard NZS 8510 was a good step forward for raising levels and creating a separation between the testers and the clean-up companies to resolve conflicts. However, he noted, it is clear that more needs to be done to improve the analysis of health implications.  

“It will be important that there is a single level that applies across all regulation including the update of the existing standard,” he added. 

The next step for the industry will be the Residential Tenancies Act amendment bill, which is currently before Parliament.

If passed, the bill will allow methamphetamine regulations to be made under the act, which would be legally binding.

The Ministry of Business, Innovation and Employment has said the standard, and the Gluckman report, would be considered when developing the regulations.

In the meantime, there are several ways property owners and landlords can lower the methamphetamine -contamination risk. Some ways to do this include:

    •    Testing new homes for methamphetamine contamination before a sale goes unconditional;

    •    Practise due diligence when it comes to reference checks for all adult tenants;

    •    Making sure there is regular, documented inspections of property;

    •    Advising tenants there will be meth testing taking place.

Based on the Gluckman report, however, property owners need only to test a property if the police have advised you it was used to manufacture methamphetamine, or if the property owner has good reason to suspect very heavy use in the property.

Gluckman recommends an initial screening method called a rapid test, which can be purchased online and carried out by any homeowner and will serve as an initial indication only. 

The Prime Minister has previously stated there will be no compensation for people who spent thousands of dollars unnecessarily clearing their properties of methamphetamine residue.



Sept 2019

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