Compulsory insurance
I was rather disappointed, but not surprised, to see the Insurance Council suggest that the solution to home owners not insuring their properties, is to make such insurance compulsory through rates.
If people choose not to insure their properties, then that is their decision (as are the consequences).
As the sensible President of LGNZ said: “If I was in the insurance industry and one-third of the population wasn’t insured, I’d look very closely at the products and packages,”
Compulsory insurance will remove all incentives for the insurance industry to be competitive.
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September 8th, 2004 at 10:57 am
I agree completely. It’s like any form of insurance, you either pay it and collect the benefits only if something bad happens or take your chances and spend that money elsewhere.
My wife and I make these sorts of decisions as a regular part of life – we have life and major medical insurance, house, contents and car insurance, but not loss of income, standard medical or disability insurance. We looked at the cost and weighed up the risks and bought those we thought we needed.
If you want to take that risk, go ahead – if you loose, then you may end up renting and paying a mortgage on house that burnt down – but you decided.
On the other hand I am a fan of 3rd party insurance for cars (like Canada), but only as that protects the poor victim of someone else’s mistake – it doesn’t protect the person who chooses not to insure their own car.
September 8th, 2004 at 12:16 pm
Au Cointreau (apologies to Jim Hopkins) Messrs Farrar and Baird. While I agree the industry should look to target low income families for earthquake and flood cover (that is the issue, not the odd fire) Ibelieve there is a valid arguement for the proposal to make EQF cover compulsory. The reason simply is that society will not allow a large number of people to be rendered homeless, even if it is because of their stupidy or wilful neglect. As a nation we canot live with the spectacle of hundreds of families living in the gutter. So if society has to pay, one way or the other, then make sure all of members society pays their individual fair shares.
And pleae,Mr baird, let’s have no more of “their” when referring to the singular person. That’s leftyspeak.
September 8th, 2004 at 12:43 pm
Of course no one mentions which poor insurance company must take the bad moral risks or those with a bad claims history. Does the Gov’t intend to remove an insurer’s right to refuse a risk?
September 8th, 2004 at 1:11 pm
Is there a ‘just flood’ insurance policy?
I have not heard of one.
My policy includes flood, burgarly, fire etc etc, plus topup for EQC. The answer is NOT to have another TAX on everybody, but to differeniate the insurance product.
Seems sensible policies also to some council/town planning changes to house design or no housing areas for those areas that will have 25 year floods. Good example is Motua spillway and Scots Ferry in the Manawatu. Houses have to be 1.5/1.8m off the ground for first floor living, switchboard 2m, etc.
I would think that farms and/or farmers plus insurance will start to price land/buildings accordingly in these areas.
September 8th, 2004 at 3:22 pm
Adolf – I’ll use “their” as a gender neutral singular all I like – it is one of the definitions of their in the Oxford Dictionary.
BTW It’s not lefty speak, it’s gender neutral, and I like that – “he/she” is clumsy, amd “it” offends people.
September 8th, 2004 at 4:20 pm
Although it would not remove their incentive to be competitive it would vastly increase the rewards for collusion.
No insurance, and self insurance are both important valid options and need to be retained.
There is a moral hazard created by government bail-outs to those that are not insured – which heartily piss off those that actually paid for their cover.
Which as Finkelstein points out conflicts with our desire not to see many people homeless.
So bail outs must be carefully structured – with payments preferably taking the form of loans on easy access terms to be recovered over time.
BTW Selecting a very high excess (say $2,000, or $5,000) is an effective way of creating low cost ‘disaster only’ cover out of normal insurance contracts.
September 8th, 2004 at 9:08 pm
While there are clearly some who are cavalier about insurance cover, I believe the majority of those who don’t have cover either can’t afford it or don’t understand that they need it.
State Insurance was originally set up as a government agency to provide inexpensive insurance cover for those on modest incomes. Another triumph of the great SOE sell-off, it is now just another insurance company.
Perhaps Kiwibank could offer some no-frills cover at a modest price.