THURSDAY, APRIL 7, 2011
The leaky boat of insurance
News yesterday that the government could be bailing out the financially strapped insurer AMI anywhere between $500 million to $1 billion is enough to make even the totally uninsured wince.
Where exactly is our nation of 1.8 million workers meant to find all the funds to pay for, in the short term, the Christchurch earthquake - from munted infrastructural requirements ranging from temporary portaloos to roads (never mind accommodation) - the Pike River Mine disaster royal inquiry, the drought-struck farmers bailout, the finance companies guaranteed by the government against fallout for the Mum and dad investors - and SCF alone is taking one billion dollars of that.
That's just for this year.
Big insurers like Vero are taking the opportunity to really push the boot in by leading the accusations that if people want cheap insurance, they get what they pay for - insurance companies who do not have the money to pay out when a disaster such as this strikes. Yet - isn't this what we are insuring ourselves for? And considering the last major disaster outside of both Christchurch quakes was the 1931 Hawkes Bay earthquake (the 2007 Gisborne one was only $16 million of damage and largely covered by the EQC) one also has to ask, where did nearly 100 years of funds supplied by the one in four households and businesses of NZ who do insure themselves, actually go to? Considering that AMI spent annually just 3.7 percent on reinsuring for big disasters as opposed to the average 10 percent spent by the global insurers, who like bookmakers, layoff against such events in this way - that still means that 90 percent of money gained seems to have vanished down a black hole somewhere. Personally, I don't believe there is much of a difference between 3 percent and 10 percent in this context, although I might, from a business perspective if undercutting competitors premiums costs by as much is as suggested, be more inclined to want to do as Lumley's do and reinsure at say, 16 percent.
The government is in one heck of an invidious position - in fact, in probably no other lead up to an election has either major party probably wondered quietly to themselves whether it might not be a blessing to be the Opposition for the next three years. Any party that gets into power this year will be absolutely wincing at the books - because what's happening isn't affordable, both from an internal and external perspective.
Absolutely everything that could go up, has gone up and most by much more than 10 percent in the past two years. With of course, the sole exception of wages. Most median wage earners won't have got a pay rise this year and of those I know that have - precious few - the average is between one and two percent. Food, power, petrol, GST, I give up - has anything reduced in price? Even councils are getting together across the country and putting up the charges of dying in their boroughs by more than 10 percent in most cases for cemetery plots or other associated costs. Despite the recession and the job redundancies, most of the beggars are also raising their rates - a thing I believe is almost unforgiveable.
But back to the insurance. How can we afford to be shelling out this kind of money to insure that the insured of AMI still have insurance? It's ludicrous, because at what point do you stop and say, hang about - aren't we opening the doors for any corporate company to come in and say, carry on chaps, the old boys network will bail us out if need be.
The bottom line is, we can't afford another $1 billion. AMI has gone down the gurgler. There needs to be a way to look at rebuilding the losses of those who were insured yes - but not by giving the money to AMI.
I dread to think how Bill English is structuring our budget, due next month. Instead, the only news I've heard so far is that NZ is considering ensuring all tobacco products are sold in uniform drab olive green. Inspiring, much.
Where exactly is our nation of 1.8 million workers meant to find all the funds to pay for, in the short term, the Christchurch earthquake - from munted infrastructural requirements ranging from temporary portaloos to roads (never mind accommodation) - the Pike River Mine disaster royal inquiry, the drought-struck farmers bailout, the finance companies guaranteed by the government against fallout for the Mum and dad investors - and SCF alone is taking one billion dollars of that.
That's just for this year.
Big insurers like Vero are taking the opportunity to really push the boot in by leading the accusations that if people want cheap insurance, they get what they pay for - insurance companies who do not have the money to pay out when a disaster such as this strikes. Yet - isn't this what we are insuring ourselves for? And considering the last major disaster outside of both Christchurch quakes was the 1931 Hawkes Bay earthquake (the 2007 Gisborne one was only $16 million of damage and largely covered by the EQC) one also has to ask, where did nearly 100 years of funds supplied by the one in four households and businesses of NZ who do insure themselves, actually go to? Considering that AMI spent annually just 3.7 percent on reinsuring for big disasters as opposed to the average 10 percent spent by the global insurers, who like bookmakers, layoff against such events in this way - that still means that 90 percent of money gained seems to have vanished down a black hole somewhere. Personally, I don't believe there is much of a difference between 3 percent and 10 percent in this context, although I might, from a business perspective if undercutting competitors premiums costs by as much is as suggested, be more inclined to want to do as Lumley's do and reinsure at say, 16 percent.
The government is in one heck of an invidious position - in fact, in probably no other lead up to an election has either major party probably wondered quietly to themselves whether it might not be a blessing to be the Opposition for the next three years. Any party that gets into power this year will be absolutely wincing at the books - because what's happening isn't affordable, both from an internal and external perspective.
Absolutely everything that could go up, has gone up and most by much more than 10 percent in the past two years. With of course, the sole exception of wages. Most median wage earners won't have got a pay rise this year and of those I know that have - precious few - the average is between one and two percent. Food, power, petrol, GST, I give up - has anything reduced in price? Even councils are getting together across the country and putting up the charges of dying in their boroughs by more than 10 percent in most cases for cemetery plots or other associated costs. Despite the recession and the job redundancies, most of the beggars are also raising their rates - a thing I believe is almost unforgiveable.
But back to the insurance. How can we afford to be shelling out this kind of money to insure that the insured of AMI still have insurance? It's ludicrous, because at what point do you stop and say, hang about - aren't we opening the doors for any corporate company to come in and say, carry on chaps, the old boys network will bail us out if need be.
The bottom line is, we can't afford another $1 billion. AMI has gone down the gurgler. There needs to be a way to look at rebuilding the losses of those who were insured yes - but not by giving the money to AMI.
I dread to think how Bill English is structuring our budget, due next month. Instead, the only news I've heard so far is that NZ is considering ensuring all tobacco products are sold in uniform drab olive green. Inspiring, much.
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