Labour's Earthquake Commission (EQC) spokesman Clayton Cosgrove has maintained his call for an independent insurance commissioner despite the industry’s concerns of setting up a third regulator.
Cosgrove’s proposal is for a commissioner to be funded by a levy on insurers, to oversee the industry and conduct a complete review of the EQC and private insurance sector and its entire regulatory and legislative regime.
While the Insurance Council of New Zealand (ICNZ) pointed to the Financial Markets Authority and Reserve Bank’s regulatory roles, Cosgrove dismissed them as being insufficient.
“RBNZ and FMA
can’t deal with disputes where you feel your insurance company hasn’t performed or delayed paying you or is quibbling and trying to get out of its responsibilities. The only avenue left is to go to court and most people can’t afford that. So I reject that,” he told Insurance Business
He said the jurisdiction of the Insurance and Savings Ombudsman (ISO) was also flawed.
“The Ombudsman – the entity, not the person - is inept,” he said.
“First you have to establish if you’re in dispute with your insurance company, and many companies have played games with that saying ‘we’re not in dispute, we’re in discussion.’”
“Second, to get anywhere if it’s a major financial issue like a house you have to mutually agree to increase the monetary limits jurisdiction of the ombudsman. That’s not a dispute resolution issue, that’s not independence, it doesn’t meet the test of transparency and accountability,” he said.
He was also critical of the ICNZ’s defence that the complexity of the claims being dealt with was unprecedented.
“That was an excuse for year one, it’s not an excuse four years later,” he said.
“The private sector generally prides itself on its responsiveness, but every policy that is not resolved I believe is in breach, because the policy has a clause that says settle within a reasonable time.
“I know a case where there have been 17 inspections on a three bedroom home and they cannot get an answer, and there’s no retaining walls, nothing. I can give you case after case after case like that.”
He also argued the move to sum insured was selling a product under false pretences.
“The insurance industry has capped their risk, and secondly they’ve de-risked, with the online calculator I know of example after example where in some cases they have been 80% out.”
Cosgrove said his plan for the review was to encompass all the issues emerging over land damage and coverage, and he agreed that the fire levy would do well to come under review as well.
He dismissed Earthquake Recovery Minister Gerry Brownlee’s review saying it began in 2013 and has never seen the light of day.
“If we get into government I would make sure we work with the industry because I hope we all want the same thing, I don’t see it as a hostile review. It’s more about let’s look at what happened, identify the difficulties and fix them. My duty as a politician is to the people who pay their insurance premiums which have rocketed as insurance companies claw back the losses that have been made.”
ICNZ CEO Tim Grafton strongly rejected criticism of insurer’s efforts in a statement.
“Progress for insurers has been dependent on multiple organisations and issues beyond insurers’ control, so if there was an independent review we would welcome the cold light of objectivity being shone on every nook and cranny of the recovery because I am confident that we would not be found wanting,” Grafton said.
Grafton said the council agreed with Cosgrove’s proposal that the EQC cap of $100,000 should be lifted but pointed out that it would increase the EQC’s aggregate exposure and therefore increase the levy.