I think it would be fair to say that the majority of Cantabrians would agree that both EQC and the private insurance industry have failed the citizens of Canterbury in the most spectacular fashion. Some of these stories will be mind blowing as the recent EQC plunder alludes to. I have enumerated the problems we have all encountered with EQC before (e.g. nepotism, wildly inaccurate assessments, flawed apportionment process, reversal of settlements and constant bureaucratic blundering and plundering). In many respects, the “privacy breach” is a blessing in disguise for EQC because it avoids scrutiny of these bigger issues. Aside from that, Ian Simpson feigns “taking responsibility” and Gerry Brownlee gets to “appear magnanimous” from http://eqctruths.wordpress.com/. I suggest that there is much more to this story yet to come. We wait with bated breath.
Notwithstanding my comments above, the events in Christchurch have clarified my belief that the private insurance industry is unable to provide the requisite protection necessary for a post disaster event of the magnitude we have faced in Christchurch. There is an ideological misfit between the corporate focus on profits and shareholders and the quick and efficient return to recovery of an affected community. It is for this reason I believe New Zealand (and other nations too) should drop the private insurance model in favour of a home grown public model. The logo above was created by a friend of mine and I think you’ll agree that it encapsulates what I am trying to achieve. (See https://thechristchurchfiasco.wordpress.com/2013/04/03/so-is-this-really-the-system-new-zealanders-want/).
Let’s face it, New Zealand needs to be seriously looking to its future if and when further disaster strikes. This charade cannot continue. We need to find a better way. And there are better ways. The provision of catastrophe relief is a principal function and core responsibility of Government and remains so even if the current National Government has been unsupportive and contributed to the current market problems and distortions that we currently face in Canterbury. Its stance of standing aloof from the damaged communities has created confusion and frustration about Government roles and responsibilities amongst those affected or involved on the ground. We are in a ‘time of crisis’. This is not the time to ‘leave it to the market’. The whole fiasco demonstrates very clearly that catastrophe insurance is too important to be left to the non-performing private insurance industry. Some time ago I wrote:
“A government insurer could well provide the most effective insurance instrument for our society given its scope and size. As a single provider, the government has the potential to be far superior to private insurers in its capacity to reduce risk through aggregation while at the same time providing more cost-effective pricing than private insurers”, and ” the democratic ideal is that governments are elected by their populations to carry out the will of the people and govern in their best interests. If democracy were functional and politics honest, it would be a fair assumption that governments of the day would move to correct situational perpetuities which were not in the interests of the welfare of the citizens. Some such issues transcend party politics in the mind of the populace and should do likewise in the thinking of governments of any persuasion.” p172 Chapter 7, ‘Catastrophe Insurance: Why the Government Should Provide it’ in The Christchurch Fiasco: the Insurance Aftershock and its Implication for New Zealand and Beyond. I submitted my book to Treasury to be considered with the EQC review (some months ago) and to my dismay my submission/contribution has still not been acknowledged. It is my understanding that Government Departments are required to reply to private citizens within ten days? A sign of the times, I suspect.
Around the globe it is clear that the increasing costs of catastrophes have significantly stressed insurance markets. And it is true to say that insurance works best for high-frequency, low-severity events, which are statistically independent and have probability distributions that are reasonably stationary over time. Catastrophic events, particularly mega-catastrophes such as Katrina, Northridge, Christchurch and Haiti, violate to some degree nearly all of the standard conditions for insurability. With the ever increasing threat of climatic change and consequent ‘disaster’ there is even more urgency and reason to implement a national system which enables New Zealand to be relatively self reliant without the concern of reinsurers or insurers exiting the market – which has happened around the globe e.g. in Florida after Hurricane Andrew.
New Zealand had a public insurer in times gone by, called State (not to be confused with IAG’s State Insurance). It got its name from a large American insurer State Farm which was considered the model to follow at the time. The New Zealand Government went to California (USA ) in 1944 after the Northridge earthquake and carried out research on best practise catastrophe response arrangements and based its own EQC programme on what it found there. ‘State’ in New Zealand (back then) performed well, so well that it was eventually privatized and now only the private insurance industry remains other than the small contribution the Earthquake Commission makes toward catastrophes.
I think it is high time we seriously revisited the potential for another public system. The benefits are undeniable. The time has come to tighten constraints on insurers and find other ways to lower the now rapidly increasing costs (with the introduction of sum insured/fixed sum insurance) and expand the availability of coverage. (See https://thechristchurchfiasco.wordpress.com/2013/03/10/why-fixed-sum-insurance-is-not-the-answer-for-policyholders/).
If insurance is profitable for the private sector then it can certainly be more profitable in the public sector. This also acts to negate the ideological misfit between private insurance focus on profit and shareholders and the interests of an affected community post-disaster. Those two positions are entirely irreconcilable… And lets face it, the Christchurch experience demonstrates that ‘good faith’ is nothing more than a slogan, so let’s own our own insurer, in which we can have some faith and accountability… The numbers certainly stack up.
~Future Proofing for a sustainable, participatory, democratic society.
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