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Insurance plan will force tenants onto streets

Phil Heatley MP
National Party Housing Spokesman

28 July 2006

Insurance plan will force tenants onto streets

National Party Housing spokesman Phil Heatley says a Labour plan that would force landlords to insure their tenants' guests has been criticised as unworkable by the insurance and real estate industries.

"Insurance companies themselves are putting the kybosh on Maryann Street’s bill, even though they stand to benefit from more business.”

The Insurance Council says ‘despite the fact that insurers could benefit through increased insurance premiums, the Insurance Council has a number of problems with the method proposed in the bill’.

The Residential Tenancies (Damage Insurance) Bill would require landlords to insure tenants against the cost of wilful damage caused, not by them, but by their flatmates or guests.

“If this comes to pass, it won’t be the landlords paying the extra costs. You can bet they’ll be passed on to tenants in the form of higher rents.”

Mr Heatley says the bill passes responsibility for controlling and insuring damage onto landlords, when they have no control over the day-to-day activity in a home or who visits.

“Both the Insurance Council and the Real Estate Institute agree that landlords would struggle to get insurance for their tenants in the first instance, and even if they did there would be a series of negative ‘unintended consequences’.

“First, landlords would have to provide the identity and claim histories of tenants to the insurer. This is difficult enough because in many cases flatmates come and go without the landlord’s knowledge.

“Worse still, the resulting disclosure could see a number of potential tenants being uninsurable and therefore blacklisted for accommodation. According to the REINZ ‘the issue of compulsion to have insurance cover ... would cause some people to be unable to secure tenancy of any property’.

“Secondly, if there is non-disclosure of information on the policy or a false statement made about an incident, this could result in claim being declined because insurance companies would see it as a breach of the conditions, or even fraud. All tenants and the landlord on the insurance policy would be then tarred by the ‘actions or omissions’ of a single flatmate and this negative history would follow them all for life.

“The majority of oral submitters on this bill agree that ‘the intent is noble but it won’t work’.

“In summary, a bill that Labour is promoting as good for tenants will drive up rents and force some out on to the street. Surely, even out-of-touch Labour must see this as madness,” says Mr Heatley.


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