Time for Government to Get Back Into Insurance Business

The announcement this week that IAG is buying AMI Insurance’s “good business” but leaving the Crown to deal with AMI’s “bad business”, namely $1.8 billion of Canterbury earthquake claims, is a perfect illustration of the phrase “to privatise the profits but ocialize the losses”. So, a transnational corporation that is in the business of calculating risk, managing risk and profiting handsomely from risk, doesn’t want a bar of dealing with the negative consequences of that risk.

The Campaign Against Foreign Control of Aotearoa (CAFCA) had no objection – particularly as a Christchurch-based organisation - when the Government agreed to underwrite AMI, back in April, rather than see it go bust, as a number of smaller insurance companies had done as a direct result of the earthquakes. But it needed to go further than just underwriting AMI and then meekly taking on that company’s “bad business” while leaving IAG to laugh all the way to the foreign-owned bank.

It is what the Government is not doing that is the problem. The Christchurch rebuild has been ground to a halt by transnational insurance companies and their offshore reinsurers doing SFA. This is nothing less than a capital strike by corporations that have creamed it big time for as long as Cantabrians, whether homeowners or businesses, have been paying insurance. Imagine the uproar if this was a labour strike. When you get prominent business mouthpieces urging the Government to step in because the insurance market is broken, and accusing the insurance companies of holding the country to ransom, you know that those companies have achieved the difficult task of pissing off everyone. Imagine what the Government would be doing if it was unions “holding the country to ransom”. But the Government is doing nothing, preferring to leave it to “the market” – which means stalemate. The widely backed call is for the Government to get back into insurance, to deal with problems that the private insurers can’t or won’t handle. After all that’s why State Insurance was founded – and that’s another example of a former public asset that was stupidly privatised (the name has been kept, because the word “State” gives credibility to a foreign-owned private insurance company).

CAFCA backs the call for the Government to get back into the insurance business, as the insurer of last resort and to most effectively respond to an unprecedented catastrophe. Desperate times call for desperate measures. The Government has equipped the Canterbury Earthquake Recovery Authority with emergency powers – equally, it needs to wield some big stick in the insurance market.

CAFCA
Campaign Against Foreign Control of Aotearoa
www.cafca.org.nz

ENDS

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