3 Nov 2013

Critics slam state insurance idea

2:31 pm on 3 November 2013

The Insurance Council and the Government have both hit out at the Labour Party's policy of a state-owned insurance company, calling it ill-conceived.

Labour leader David Cunliffe announced on Saturday the party's plan to establish KiwiAssure if elected to government next year.

The company would be part of New Zealand Post and Mr Cunliffe says it would need to have total capital of $300 million to take 5% of the insurance market.

Insurance Council chief executive Tim Grafton says New Zealand already has a responsive and responsible insurance industry and a state-owned competitor could send negative signals to investors.

He says the country already has the state-owned Earthquake Commission, which has not performed any better than private insurers after the Christchurch earthquakes.

Earthquake Recovery Minister Gerry Brownlee says the policy is a populist hit that is risky to taxpayers in the long run.

He says KiwiAssure would need to take greater risks to undercut competitors and the two companies that were doing that before the Christchurch earthquakes have since collapsed.

Mr Brownlee says international insurance companies are able to hedge their risk across a range of markets.

Homeowners supportive

Canterbury homeowners battling insurance companies say they are delighted to hear Labour's plan but they believe tighter regulations are needed first.

Canterbury Insurance Assistance Service trustee and city councillor Ali Jones, who is struggling with her own insurance company, says she is thrilled the issue is being tackled.

However, Ms Jones says Labour is putting the cart before the horse.

She says punitive measures should be in place to force insurance companies to deal with claims in a timely manner.

The couple who successfully sued Tower Insurance over their red zone damaged home, Matt and Valerie O'Loughlin, are also backing the KiwiAssure idea.

Mr O'Loughlin says he believes the new company could fit within the Earthquake Commission, keeping the funding of home rebuilds in Canterbury within the same organisation.

He says people need to start talking about massive hikes in the cost of rebuilding, which he says makes building a new home more difficult the longer insurance companies are allowed to delay settlements.