Thursday, September 9, 2010

ZenTiger Earthquake Insurance

I'd be surprised if it hasn't been said yet, but it's obvious that Earthquake Insurance is a necessity for New Zealand. Currently, a levy is added to an insurance policy and that is a flawed approach. Already, the are people of Christchurch stepping forward hoping for a hand out because they haven't any insurance. I find it hard to believe that a homeowner wouldn't insure their home, and I'd expect it to be a condition of a mortgage, but there will always be a few that escape the net. It would be interesting to know the numbers.

So if uninsured property owners receive compensation or assistance, it's not particularly fair on those that have paid the premium and the levy. On the other hand, it's going to be unduly hard on the uninsured. There lies an interesting debate on how much assistance will be provided, perhaps with a loan or a fee attached to the aid equivalent at the least to many years of Earthquake Levies.

I also have a fairly simple solution going forward. Apply the Earthquake Levy to the Rates bill, based on the capital value of the buildings attracting rates (not necessarily the land value). This would ultimately mean that every building has a levy contribution. If a building rating system is introduced, then the levy could potentially reflect the damage risk to a building too.

Either that, or let uninsured homes suffer the full consequences. But does the New Zealand government have the stomach for that approach?

With regard to uninsured contents, well, that's where the consequences certainly do need to fall, in my opinion. The Salvation Army and St Vincent De Paul type op shops come to the rescue here, not to mention relatives and friends. If New Zealanders make donations of blankets, pots and pans, toasters and vacuum cleaners and clothes and furniture, then the uninsured can go down market and put clothes on their back with a sense of gratitude and humility. Tax payers don't need to step in to provide a new TV and Playstation.

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