Labour Party Policy a Mixed Bag

The Insurance Council of New Zealand (ICNZ) would welcome any review of insurers’ response to the Canterbury earthquakes, rejects the Labour Party’s proposal for another regulator of the industry and supports its policy of transferring levies from insurance premiums.

ICNZ Chief Executive Tim Grafton in responding to the Labour Party’s policy on disaster-related insurance issues strongly rejected criticism of insurers’ efforts.

“The Canterbury earthquake series is without doubt one of the world’s most complex insurance claims which has no international benchmarks with which to make comparisons,” he says.

“Yes lessons have been learned but insurers have done extraordinarily well in progressing claims given the complexities. Indeed 87% of all over-cap claims for major repairs and rebuilds are either settled or in the build queue.

“Progress for insurers has been dependent on multiple organisations and issues beyond insurers’ control, so if there were an independent review we would welcome the cold light of objectivity being shone on every nook and cranny of the recovery because I am confident that we would not be found wanting,” Mr Grafton says.

The industry is also in the process of reviewing the Fair Insurance Code, following public submissions and a rigorous assessment of how insurers can improve the way they deal with their policyholders. A revised code is expected to come into force by early next year.

“However, we have concerns about setting up what looks like yet a third regulator for the industry as the Reserve Bank and the Financial Markets Authority already have responsibilities for regulating insurers. This will add costs to insurers which will inevitably be passed on to policy holders,” he says.

“Labour’s policy to transfer the EQC levy to rates is welcomed. For consistency, it should also commit to removing the Fire Service Levy to rates as this would address the free-rider problem where people who don’t insure enjoy the benefits of the public good the Fire Service brings. It is good policy to remove levies from insurance to help keep it affordable and available for all. Local government should be reimbursed for the cost of collection.

“We agree the EQC cap of $100,000 needs to be lifted. It was meant to represent the cost of rebuilding a modest home and has not changed since 1993. However, this will increase EQC’s aggregate exposure and will therefore increase the levy.

“There are many other issues that are not addressed by this policy including how EQC will cover land in future. Land coverage has proved one of the most challenging aspects that Christchurch has raised particularly with respect to area-wide damage increasing vulnerability to risks like flooding and the implications for properties and how they get reinstated,” says Mr Grafton.

ENDS

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