In today’s, Sunday-Star Times, Rob Stock picks up on a topic I’ve been writing about:
THE EARTHQUAKE has exposed a policy that must be changed immediately – the way the Earthquake Commission is funded.Significant numbers of people will get nothing from the commission because it is funded by a levy on house insurance. Those without it do not qualify.
The government is making noises about not paying to rebuild uninsured homes – apparently incautious investors and unwary leaky-home buyers are worthy, but imprudent homeowners are not..
…As a taxpayer, I am suffering from bailout fatigue, but I can’t help feeling the country walked blindly into this mess because of the foolish way the commission is funded, which, incidentally, is the foolish way the Fire Service is underfunded.
The commission levy is made on private insurance for the same reason the Fire Service levy is. Insurance companies invented fire services, says Chris Ryan of the Insurance Council. When a national fire service was created, the funding mechanism remained, and it was convenient to keep the same system when the commission was set up.
This guaranteed that not everyone would pay for the Fire Service and that in every massive natural disaster there would be those lacking insurance, because there are always households without cover, some for understandable reasons – redundancy, illness and so forth – and not because they are feckless ne’er-do-wells.
We could have done better, and indeed, the Insurance Council told the Sunday Star-Times that the last Labour cabinet discussed ways of shifting the Fire Service levy on to a universal payment such as local authority rates.
That the commission should be funded that way too is an idea worth debating, and the council – which would be delighted if its members could offer cheaper policies by stripping insurers of their role as tax collectors – believes the idea could now get a fair hearing. …
… Switching the levy on to rates would not be popular with local authorities, already understandably sensitive about the sheer size of their rates demands, but it would mean total coverage of households in the event of earthquakes.
We could fix the Fire Service’s funding at the same time.
No hat-tip, Rob? 🙂
Seriously though, this would be a simple fix that would see everyone covered while avoiding the moral hazard of bailouts. Hopefully, the government will move ahead with it, and the disaster income insurance I’ve suggested.
[Edited title and author of article…RL]