Vero questions EQC role
General insurer Vero is questioning whether the Government should continue to run an agency like the Earthquake Commission.
The chief executive of Vero, Gary Dransfield, raised the question in his address to the Trans Tasman Business Circle lunch in Wellington today.
New Zealand's second-biggest general insurer with about 23 per cent of customers still advocates that the Government should partly insure and fund its citizens for disaster insurance.
But Vero says options for reform could include EQC having no role in handling or managing claims, or a government agency having a much smaller role in providing and managing general insurance.
At present, EQC covers the first $100,000 plus GST of a property claim and the first $20,000 plus GST of contents in a natural disaster.
One option could be that claims management run by insurers and the Government have a funding role like a reinsurer.
"Some of the models could result in a substantially reduced level of Crown involvement in the provision and administration of general insurance, including no involvement in claims management," Dransfield said.
Other models could have a different level of crown and private insurer funding.
Vero will be making submissions along these lines to the Government's review of the Earthquake Commission Act.
Dransfield said the review was a "once in a generation" chance to markedly improve the way natural disaster insurance was funded and managed.
Vero indicated it thought the complexity of the present "hybrid insurance" model where EQC and insurers handled claims was a waste of money for the Government and for insurers.
"That is why we believe every effort should be made to ensure capital is not needlessly wasted by a hybrid earthquake management model that duplicates costs and escalates claims handling expenses.
"Given the Government's commitment to a balanced budget and debt reduction, Vero questions whether it is sensible to operate a fully resourced and funded public insurance agency with the sole mandate of managing claims after a major natural hazard disaster," Dransfield said.
The Government's liabilities from the Canterbury earthquakes was so far $1.6 billion and could easily increase, given that EQC still had 80,000 properties with claims to manage, Dransfield said.
Private insurers were more than a third through settling their claims.
The EQC's annual report shows it is just over 20 per cent through settling its clams.
- The Press