Speech notes from small business owners hit by earthquake

These speeches were delivered at a meeting of the Canterbury SME Action Group at CPIT on  December 19, 2010 at 7.30am

Judy Tardi: Aspiring Language Institute

Good morning!
I am Judy Tardi. I was born in Hungary and came to New Zealand as a political refugee in 1983, some 28 years ago.
For over 21 years I have run the Aspiring Language Institute, one of CHCH’s oldest English Language Schools. We have built up a fantastic reputation in over 30 countries in the world.
NZQA rated us as excellent in all areas of our operation, including financial management.
I am also the Honorary Consul for Hungary.

21 years of running the school through highs and lows. In the last 10 years we traded through September 11, SARS, Bird flu, Swine flu, and the biggest financial crisis the world has seen since the 1930s. We survived it ALL, BUT the aftermath of the Canterbury earthquake, the biggest loss in consumer confidence, is literally “shaking” us.
This time we were the target, not by terrorist, but by mother earth.

Today I also take the liberty to include in detailing our plight, the privately run language schools, accommodation providers and tourism operators. As CHCH is the gateway to the South Island, operators as far as Queenstown are suffering. Those students that we do not bring here, will not go there either. As simple as that.

In reply to Mr Brownlee’s comments about bringing customers to our door, I will tell you what we have done so far and what help has been offered:

The Ministry of Education kindly informed us that they received $100,000 to run cashflow workshops for us. I was livid: after 21 years of running a successful business with agencies spanning across the globe, I do have a fair idea how to manage cashflow. I would have better ideas how to use the $100,000 in more meaningful ways for our sector: Trade shows/language fairs, for example. They cost a minimum of $5000 to $7000 a pop, and that’s without airfares.

There is a perception out there that there is widespread destruction in Canterbury. This has had the effect of dissuading tourists, foreign students and also their parents from coming to CHCH. They have many other beautiful cities in the world to choose from and right now ours is not looking great.


Already in the middle of September and at the end of November, we had major travel and educational agents visit CHCH and our school to show we are OK. 10 of the largest Korean agents came to CHCH on the 15th of September. We received zero bookings from the visit, we were told that students decided to go to Auckland or Australia instead, for the time being.
They did not like the earth moving while they were here.
Just this Tuesday we had a visit from the Saudi Arabian Cultural Mission. Dr Sammer liked our school but said that Saudi people are afraid of earthquakes. It will take time for them to come back in the numbers they used to.
We have contacted hundreds of past students and all our agencies in the world by e-mail, we have posted the latest pictures and messages on our website, ran a wordwide internet competition to win an all paid trip to CHCH, made a new promotional DVD – so far, we have not seen the expected results.
Us alone, simply cannot compete with the visual images of the quake that were spread around the world temporarily wiping CHCH off the map as a safe place to study & visit.
Here I ask the media and the government representatives to help us to undo this damage.

Tourism and the English language industry have been consistently one of the highest export earners in this country. MOE latest figures show 2 billion dollars per year for the economy.
I have tirelessly promoted NZ and CHCH, all over the globe, as a tourist and study destination. In the last 21 years, our relatively small business has brought in through tuition fees, homestay fees, activities and other spending, over $40 million into the region – all without government funding. I give well-paid, secure jobs to 13 people who have been with the school for over 10 years.
This time our business needs help to keep these dedicated professionals employed.
In light of the figures, help would make sense, wouldn’t it?

I do know, that quite a number of host families rely on the extra income earned by hosting students, to keep up their mortgage payments. We are talking middle class CHCH here.
Middle class is sinking like the very ground our homes are built on.

Not to mention a lot of you here today: the impact on local businesses that count on our students and tourists spending their money locally: from the jetboating company to the local hairdresser. Most of you told me, you are already feeling the impact.

The earthquake for our industry could not have come at the worst time. Having survived the recent economic crisis, we were looking forward to a good high season indicated by great forward bookings in August. The earthquake brought the bookings to a complete halt in September and the recovery has been slow ever since.

This time I borrowed against our home to keep the business going. I cannot continue doing it long term. My business benefits the whole country. I want recognition for my contribution to the economy and I need help to weather the storm.


Insurance
Immediately after the quake, adrenalin kicked in, I was on cloud 9 to have survived a quake of that magnitude. Pretended for our students’ sake that it was business as usual.
I knew the business was fully insured, apparently I took out the best comprehensive small business policy there was: business interruption, profit loss, disruption of supply, all included.
Then - reality kicked in: Insurance came up with the “fine print” and informed us that we were entitled to absolutely nothing because as our building was still standing, they believe we were not directly affected by the quake. Wow! Really?
We need our prime minister, government and earthquake minister to come down on these insurance companies like a ton of bricks to honour the spirit of our policies:
If it’s grey, you pay.
We need help to tackle the insurance issue. Our resources, and by now our energy is too low to take on the insurance giant alone. Perhaps class action?

On a personal level, it comes to a point that having worked extremely hard promoting NZ, the only one time I ask for help because we got into a difficult situation through no fault of our own, the answer I get wherever I turn “tough luck, hundreds more businesses will fall over”.
Until I read Matthew’s article in the Press I felt like a failure, blamed myself, I felt isolated and alone. Noone likes to share their business difficulties. Not a great dinner party topic.
I never ever want to be in that dark space again, and I do not want any of you to feel like that either. This is one of the reasons I am standing here and talking to you today. Just like you, I am a proud, hard-working, self-directed human being. Noone, absolutely noone has the right to make you or me feel like a failure.
It is a kick in the gut that SCF gets bailed out to the tune of 2 billion dollars, and we cannot get any help which our small business would repay the economy many many times over.
We want to move forward. We need help that is no less than the film or the kiwifruit industry got. A handout of the size SCF got would be great, but we are not that “greedy”.

Baffled, that the very people who lead this country in this crisis have chosen the rather unpalatable solution of paying unemployment benefit and other related welfare expenditure rather than help us all to trade through. It just does not make sound financial sense.

I have been a good employer and taxpayer for 21 years, always paying my taxes fully and on time. I am a dream citizen to have, I cost nothing to the economy and from my own initiative I bring export dollars into the country.
Am I a fairweather taxpayer and citizen, only good when I contribute and tossed aside like a drone when no longer useful? Please prove me wrong.

I want to live in a country where hard work and integrity are valued, where children have a future to look forward to, where those in genuine need and misfortune are looked after.
What happened to the New Zealand I came to 28 years ago?
Please tell us that people still matter and it’s not the almighty dollar that’s most important.

We do need meaningful help to survive and prosper.

Thank you for listening to me.

Colin Crequer: Cross Brothers Butchery

I suspect the Cross Brothers story is a common tale. 10 or so days after the quake I finally managed to meet the loss adjuster – “I’ve read these 87 pages”, I told him – “but I can talk my way in, and out, of cover. The insurance company can get out of this. I need to close up”. “No. No!” He assured me, “you’re covered! Look, you’ve had damage – that triggers the BI clause. Gross Profits is the policy response; feed us the info on what your turnover was and we’ll get it sorted out”. He wasn’t trying to mislead me. Unfortunately he didn’t portray the complete story.

It took us a few weeks to put together the BI claim after the first months reduced trading. A few weeks after we submitted it, we received the reply that made us sweat. A couple more weeks of to and fro – and clearly this was not going far. Our damage was stock damage only. Only a small interruption in consequence of that damage. The road closed or one-way for over 10 weeks – the area a bomb site; too bad: a sum-insured 5% sub-limit applies. References throughout the schedule and the policy to ‘earthquake indemnity’ and ‘earthquake full reinstatement cover’ and ‘company earthquake sums insured’ all actually refer to earthquake damage – a subtle but important difference that leads to misunderstanding – and then further to that, the interruption has to be in consequence of that damage – and I have to prove it.

Despite the anguish of losing thousands of dollars, of not being able to provide employment for our fantastic staff – we employed more than 6 fulltime equivalents in August – and of feeling somewhat responsible for the failure of a brand that has existed in the area for 50 years, we simply had no other option. We closed last Saturday.

Over the last couple of weeks we experienced a range of emotions in the shop – some customers quite angry that we were closing. And some, genuinely quite sad. You see, butcheries aren’t ‘owned’ by the butcher – they become ‘my butcher’, or ‘our butcher’, “our butcher makes great sausages” for example; a place that people regularly visit for a chat, a bit of lip, or a corny comment – a place that they enjoy visiting because they can engage; often it makes them smile. Now they have to change their routine and, god forbid, go to the supermarket where they can talk to the shelf about the cut of meat they are buying, and if it’s not up to scratch they can take it back and tell someone who doesn’t give a damn. One elderly lady told me she had been shopping at Cross Brothers off and on for 35 years – she probably spends six dollars each visit and allowing for the chat it probably costs me more in wages than the gross profit she provides. But that is part of being in the community – part of being a service provider – part of being a responsible citizen. It is that, that people are angry about losing.

I am pleased to let you know that the famed Cross Brothers name is poised to continue in Sydenham – my able butchery manager James Bell has decided to purchase the plant he needs and the Cross Brothers name. He plans to operate out of a smaller premises in Sydenham central mall and to be up and running in the New Year. It should be a very good location . . . how many of you have noticed the lack of fresh produce shops in our malls? It’s ironic that despite our free trade pursuits, major supermarkets are allowed to invoke restraint of trade clauses to keep butchers and green grocers out of malls. If we have learned nothing else from this earthquake it is that community is important – please support James, please support your local butcher – and don’t forget to engage in a bit of banter!

What annoys me greatly about our situation is that despite acting diligently we have still had to close. I assessed the risks facing my business and took what I, and my broker, thought was appropriate cover - but it’s actually been dreadfully inadequate.

Who actually understands these things? The Gross Profit policy response clause regarding ‘reduction in turnover’ has five defined terms and those five definitions contain another twelve defined terms. It’s extremely complex.

Did you read about the Honey Pot Café in yesterday’s Press and the reduced BI payout due to ‘depopulation’?

Lets pop up to Hamilton, or similar, and conduct a little survey of BI Insurance policy holders: ‘Your business has been interrupted in consequence of damage caused by an insured peril and the company has accepted your claim. Explain the effect that depopulation will have on the amount paid by the insurance company’. Could half the brokers answer the question? I don’t reckon half the BI ring-in loss adjusters the industry has wheeled out could answer the question! And yet somehow, we, as customers of the insurance industry are supposed to be informed.

I’ve spent a lot of time over the last few weeks trying to figure out how my understanding of what the policy was to provide, and what the insurance company has offered me, could be so vastly different. I’ve had the benefit of guidance from one of this town’s most respected insurance lawyers and one of this country’s most respected loss adjusters. Basically, the upshot is: You signed it. In their view I’ve been treated harshly; but if I take it to litigation I will not win on the words in the contract; the Court cannot change the contract just because I failed to fully understand it.

But I am still somewhat aggrieved. Vero’s assertion at the front of the policy document includes : ‘we are committed to complying with the Insurance Council’s Fair Insurance Code . . . this means – amongst other things – we will provide insurance contracts which are understandable; settle all claims fairly, and promptly; and clearly explain the reasons why a claim has been dismissed’.

Good luck with that!

Cross Brothers employee and turnover numbers put us outside the scope of the insurance ombudsman scheme, but if you want to try the insurance council to attend to your grievance, keep in mind their chief executive’s comments reported in yesterday’s Press: he apparently said: there are always going to be people who are unhappy with their claims. An exceptional piece of reassurance that the industry is effective!

Just how significant is this insurance issue? If insurance is ineffective in a country that is underpinned by small enterprises and if that insurance industry can’t cope with providing natural disaster cover, then there is a huge problem. Government wants us to generate jobs, provide services, convert ingenuity into GDP, lease property etc. Our businesses support accountants, lawyers and many other professionals; we collect taxes on the government’s behalf – but if we cannot effectively mitigate some of our risk, then we cannot function responsibly. This earthquake is reported as the fifth most significant earthquake insurance event ever, on the globe. That is huge. And small to medium businesses are the backbone of this country’s economy. It simply is not acceptable that our government does not express any requirement for the insurance industry to respond and to perform responsibly. And given that the industry is actively minimising its liability through action that respected insurance guru’s consider ‘harsh’ the government’s unpreparedness to assist is as desperate as the policies we have purchased.

So what should the government be doing? If a business is going to the wall because of the quake, but would otherwise be reasonably prosperous and stable, government should keep them afloat by subsidy, grants, loans or whatever other mechanism can be made available. They should be actively supporting such businesses. If there is no merit in supporting a particular business, government should assist that business to defray liabilities such as lease payments – while the earthquake has knocked my business over, I don’t think it should fall to me to indemnify the landlord such that his earthquake experience is painless while mine is crippling.
 

And my advice to fellow small business owners: In the current post-earthquake environment, if your business is significantly affected, you are gambling. You are not able to effectively manage because you cannot get reliable, consistent information upon which to make your decisions. Your Mayor, your councillors, and your customers - like mine - will be sentimental about your business and will likely wish you well and every success – but unfortunately sentiment doesn’t buy much meat. Even if you were diligent and have BI insurance, unless you have been given specific and clear responses about the on-going support your insurance company will provide, assume you are about to get ‘populated’ in a most uncomfortable manner! Fates fickle finger has done a job on me. Has it also got you? We should’ve ‘folded’ immediately after the quake. ‘Holding’ has cost me thousands. Why did I do it? Because the insurance company advised me I was appropriately covered. Can I prove that? Probably not. It was hard enough to get an appointment to meet the insurance company’s representative, let alone get him to respond in writing. Cast your mind back – a time of community spirit; people reaching out to their neighbours to assist where they could; exceptional business co-operation and assistance offered to those seriously affected; abhorrence towards those who disrespected others property; business ethics and business community responsibility to the fore. And the insurance industry’s response towards business interruption claims: absolutely appalling. Is the insurance industry legally correct? It seems so. Is the insurance industry acting ethically? They’re not even on the page.
 

I bet you are wondering: if James is going to relocate the business and keep it going, why won’t I? There are a few reasons – my wife and I are emotionally exhausted. The turnover will only be sufficient to support an owner operator for some time – it simply won’t enjoy the economies of scale for a larger operation for a while. But mostly I don’t want to put my effort into rebuilding a brand and business to the point that business interruption insurance is virtually a necessity and then have those efforts unstitched by an insurance industry that is woeful.

I wish each of you the very best of luck!