The “Shake and Pay” parametric insurance product provided by Bounce Insurance was almost triggered by the big quake recently experienced in the Taupo region at the beginning of December. This story was recently covered by Insurance Business NZ - please click here to refer to the story.

Bounce provides a unique parametric insurance product where the policy and the claim payment are triggered by the underlying ground movement resulting from an earthquake (as opposed to damage and loss),as reported by the nearest GeoNet strong motion sensor. This means that once the policy has been triggered by an earthquake that a payment can be made in days providing households and businesses with much needed cash to assist their recovery during a crisis. A bounce policy is triggered by an earthquake with a shake intensity (as measured by the Peak Ground Velocity) measure of 20cm per second with a full payout made when the ground moves by 30cm per second.

The most recent shake in early December was a reasonably significant M5.6 earthquake that shook the residents of the Taupo from their slumber. Paul Barton, the Managing Director of Bounce, said that “the quake was certainly large enough for me to grab a mid-night coffee and review the GeoNet measures. Given the size of the shake, I was thinking that this could be our first quake event where customers are eligible for a payment, so I was keen to get that process operational and payments made if the policy had been triggered”.

On review, the largest movement recorded by the GeoNet sensors around Taupo recorded a ground movement of 17cm per second. Mr. Barton said that “it was close, but not quite strong enough to trigger a payment under our insurance policy”.

Mr. Barton said that he “was keen to check the dimensions of the quake because on the face-of-it I was wondering if it was similar intensity to the South-East Christchurch quake on 23 December 2011 which had a magnitude of 5.8”. While dimensions appeared to be quite similar, the impact of each event was disproportionately different with significantly more damage resulting from the Christchurch quake. Part of the reason for the difference in damage was that the ground moved by 49cm per second in the Christchurch quake, which was significantly more violent than the shaking experienced in the recent Taupo event which produced a ground movement of only 17cm per second. Mr. Barton suggested that some of this “variation in impact to buildings and communities probably highlights the exponential difference in the size of the earthquake, a M5.8 is quite a bit bigger than a M5.6 event, and the nuances resulting from proximity of the epicentre of these quakes to urban centres, the depth of the quake, and the structure of the underlying soils”.

Importantly, while this was a relatively big shake, it was not big enough to cause injury or loss of life, and aside from Tsunami-type waves causing the loss of some of the foreshore on the eastern side of the lake (and a loss of pedal boats), there was fortunately very little significant structural damage to houses and buildings.

The good news, from the scientists is that this type of increase in seismic activity is not that unusual. As mentioned by GNS Science, this “is just the volcanic region going through its various cycles and then there’s lots of faults around the region and so it just causes slips on the various faults around the area”.  

 Preparation is key. If cash in a crisis is something that concerns you, please refer to Bounce Insurance to learn how parametric earthquake insurance can close the gap and provide you with much needed cash in a crisis.