As many of you will be aware the Earthquake Commission’s (EQC) funding and structure is to come under scrutiny in a government review of the legislation designed to provide a degree of public insurance and financial protection when natural disasters strike. Finance Minister Bill English and Earthquake Recovery Minister Gerry Brownlee announced the review of the Earthquake Commission Act 1993 to be led by Treasury, with help from the Reserve Bank, EQC, Ministry of Business, Innovation and Employment, and an independent policy expert.
The review’s objectives include supporting a functioning insurance industry for economic growth opportunities; minimising the fiscal risk to the Crown in covering private property damaged in natural disasters; supporting efficient management of natural disaster risk and recovery and reducing the potential for socially-unacceptable distress and loss for property owners caused by natural disasters. The government will also consider the schemes design and how the EQC should be structured. In addition it will consider what the government’s risk preference is, and how that risk should be financed, including the size of the disaster fund and alternative financing instruments.
There are concerns that the review will not look at delays or other issues surrounding the settling of claims in the wake of the Christchurch quakes. Earthquake Recovery Minister Gerry Brownlee says it is not intended to provide an audit of the commission’s performance in Canterbury. It really should- and I am in full agreement with Labour’s earthquake recovery spokesman Clayton Cosgrove when he says that “It takes no regard to the adequacy of the claims settlement process that we have at the moment, yet it seeks to somehow improve the performance of EQC, so there are some contradictions.” He went on to say “You’ve had two years of the claims settlement process, there are incredible learnings that can come from that.” There are indeed, and as Cantabrians we are in the best position to be able to inform the Treasury and Government of our experiences, where we see the need for change and where we see the current failings in the system. It is for that reason that I have submitted the book The Christchurch Fiasco: the Insurance Aftershock as part of that process.
Included below is my letter to Treasury. I would encourage other Cantabrians to express their experiences and concerns as part of public submissions to the review panel. The contact person at Treasury is: Mr. Cantwell, The Treasury, 1 The Terrace, Wellington 6011, New Zealand.”As an aid to the current legislative review of the Earthquake Commission Act 1993, I wish to submit The Christchurch Fiasco: the Insurance Aftershock its Implications for New Zealand and Beyond as part of that review. I note that the Treasury-led review is to draw from lessons learned about the operation of the legislation in response to the Canterbury earthquakes and hence I believe it to be timely to submit the enclosed document prior to the public submissions scheduled for some time in March 2013. I do this in respect of Treasury’s intention to consult groups representing ‘home owners’ or other ‘non-industry stakeholders’. The book, which covers many of the points which the Commission will review, has been well received by the public and is currently on its second printing.I understand that the review will focus on a number of issues including:
- The types of property the Earthquake Commission insures as well as the structure and extent of EQC cover;
- How the Earthquake Commission prices its insurance;
- The institutional structure and design of the Earthquake Commission, including its roles;
- The financial management of the Crown’s risk exposure and how it should be financed.
I feel it is critical that in light of the experiences in Canterbury that the Government, as the representative of the citizens of New Zealand, review and amend disaster insurance arrangements to existing policy settings where necessary. As part of that review I commend particularly the following chapters from my book The Christchurch Fiasco: the Insurance Aftershock and its Implications for New Zealand and Beyond. Each of these chapters relates to a topic that the Commission has undertaken to review:
- Chapter 3 (EQC and Earthquake Insurance),
- Chapter 4 (‘Good Faith’: The Insurance Industry and Catastrophe),
- Chapter 5 (The Reinsurance Industry),
- Chapter 6 (Policyholder Protection),
- Chapter 7 (Catastrophe Insurance: Why the Government Should Provide it).
Canterbury is serving and will serve in the future as the principal case study for the approach to natural disaster management in seismic New Zealand. My submission seeks to achieve the following objectives:
- Support of a well-functioning insurance policy and system to enhance economic growth opportunities in New Zealand.
- Minimise the fiscal risk to the Crown associated with the private insurance industry and property damage as a result of natural disasters.
- Support an efficient, community-centred approach to the overall management of natural disaster risk and recovery in New Zealand.
- Minimise the potential for property owners to experience socially-unacceptable distress and loss as a result of covert corporate policies, in the event of a natural disaster in New Zealand.
I believe that my submission has great relevance. As an affected Canterbury resident and researcher, I am and fully conversant with the many problems Cantabrians have faced with both the private insurance industry and EQC over the past two and a half years. I trust that as a New Zealand voter and contributor to New Zealand society, my contribution is able to assist in the review and future shaping of the EQC scheme.
I believe that EQC (with restructuring) has the most ability to contribute transparently and effectively to the future protection and welfare of the citizens of New Zealand. The private insurance industry has shown itself unable and unwilling to contribute to the recovery of Christchurch in anything other than a self-serving manner and in this way shows itself as unfit to retain the status of a major player in times of national disaster. In a seismic nation such as New Zealand, this is a stance that we can ill afford. I propose that there is a better way.
I wish the Commission well in its deliberations.”