Insurance change cuts university costs, draws fire
The University of Canterbury will save millions of dollars by changing its insurance policy, but the Government is questioning the move.
The university has opted out of a collective insurance agreement that covers the country's universities because it can save $4 million annually in premiums.
The Tertiary Education Commission (TEC) had written to the university asking it to reconsider its decision, university vice-chancellor Rod Carr said in his report to the university council.
This is despite repeated calls by the Government for the university to save money as it faces serious financial challenges after the earthquakes.
Carr said yesterday that the new cover was prudent and appropriate to the risk the university faced.
Under the insurance collective, the university was due to pay $7m in premiums next year, up from $1m in 2010. It would have to pay the first $20m (excess), up from $250,000, on any damage relating to seismic activity. The insurance company would then pay up to $550m.
The new cover, effective from December 1, would cost the university pay $3m in premiums and an excess of $1m. The maximum payout from the insurer would be $30m. "It's the right cover for the risks we have. It is adequate cover and affordable," Carr said.
He said it was a matter of weighing up the university's risks.
If a quake caused more than $30m of damage to the university now, its biggest problem would not be buildings; it would be a lack of students, Carr said. The new cover was provided by a series of syndicates that operated in the London market.
Carr said he did not have a problem with TEC questioning the university's decision. "They want to understand what we are doing and why we are doing it."
He did not believe the university opting out of the collective would mean an increase in premiums for the other universities.
A TEC spokeswoman said matters pertaining to Canterbury's insurance were still under discussion, and it was not appropriate to comment.
A spokesman for Tertiary Education Minister Steven Joyce said the minister did not have a view on the university's insurance decision, but it was important it "carefully meets its obligations under the Education and Public Finance Acts".
- © Fairfax NZ News
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