November 2, 2013

Kiwi Insurance Ill-Conceived Back to the Future Policy

Creating a State-owned insurance company is an ill-conceived back to the future policy, says the Insurance Council of New Zealand (ICNZ).

The Labour Party today announced that if elected to Government in 2014 it would establish KiwiAssure offering home, contents and vehicle insurance, along with cover for small business plant and equipment.

“This is the second political party to hold its annual conference in Christchurch in recent weeks attempting to grab low-hanging political fruit by ignoring the scale of events in the city and blaming ‘foreign-owned’ companies for the pace of recovery efforts to justify establishing a State-owned insurer,” says Insurance Council Chief Executive Tim Grafton.

“Insurers believe recovery efforts in Christchurch are progressing well given the enormity of the task and the unique situation in New Zealand that requires the State-owned earthquake insurer EQC to deal with claims before transferring over cap claims to the private insurance industry,” says Mr Grafton.  “The fact is, the vast majority of claims are already being managed by the State-owned insurer EQC and State-owned claims manager Southern Response.”

“New Zealand already has a responsive, innovative and responsible private insurance industry and to suggest that further State ownership is the answer, begs me to ask what on earth is the question?” says Mr Grafton.

“Insurance is footing almost $20 billion, or 10% of New Zealand’s GDP, for the Christchurch recovery.  Given its size, New Zealand is one of the most vulnerable countries in the world to natural disasters, so maintaining an appealing, competitive insurance market is essential.  Establishing a State-owned insurer and slamming foreign-owned insurers sends a very negative signal to those who provide the investment capital to support insurance activities in this country that there will be no level playing-field.

“Following the Canterbury earthquakes, the last thing anyone should be doing is trying to drive away insurance capital,” says Mr Grafton.

“Further, it only adds exposure to taxpayers who face more risks if a State-owned insurer ends up manipulating premiums for political purposes ignoring the whole purpose of insurance which is to price risk,” he says. “It makes absolutely no sense to have three State-owned insurers - EQC, ACC and now KiwiAssure.”

ENDS

© Scoop Media