Winston Peters: Beware the industry rort

On March 2, this column advised New Zealanders to keep a weather eye out for a gathering storm of artificially-inflated insurance costs, veiled in the cloak of personal and national tragedy.
Back then, forecasters were tipping premium rises of 20 per cent to 30 per cent.
Now this week's headlines carried news of hefty rises of 50 per cent in the cost of house insurance.
In Wellington, commercial property premiums have doubled from 15 cents per $100 of value insured to 30 cents, and rates in Canterbury have quadrupled to match Wellington, while Aucklanders' premiums are up by 30 per cent.
In some cases, the excess on a $1 million commercial property has gone from $2500 to $50,000 on a $100,000 claim.
This is the exorbitant price gouging of which the March column warned.
Before we are swamped with massively-inflated premium costs nationwide, an urgent governmental inquiry is desperately needed to stop this industry rort happening in an ocean of resigned acceptance.
Average house premiums are going up by as much as $300.
The excuse is that global reinsurance companies are demanding five-fold increases from insurance companies operating in New Zealand because of huge losses in the Asia-Pacific region.
The Canterbury earthquakes, the Queensland floods, Cyclone Yasi and the tsunami in Japan are said to be behind the rises. Hold on a minute.
The Asia Pacific region is the biggest in the world and more than 70 per cent of the planet's population didn't suffer from such calamity.
We're now told to expect an increase in earthquake levy premiums and the fire levy due to Christchurch.
Or as Insurance Council chief executive Chris Ryan put it: "a triple whammy for consumers". Well, readers will know of two drivers behind this increase - but what is the third that Ryan was referring to? If that's not bad enough, AA Insurance head of strategy, Suzanne Wolton, said reinsurance premiums would rise 'in the hundreds of per cent" and apparently "wouldn't be surprised at building cost increases of 50 per cent". She went on to warn "people need to be bracing themselves for an increase in buildings insurance which reflects what has happened ... and the value that insurance provides". AA Insurance is, of course, owned by Australian giant SunCorp, which also owns Vero in New Zealand.
And then the doozy of them all is Rob Flannagan, of Tower Insurance ,alluding to reinsurance increases ranging between "50 to 400 per cent" but that "it was too soon to say what the impact would be for customers". Really?
If ever there was a time for New Zealanders, from Kaitaia to Bluff, to be on red alert, it is now. We are all about to be seriously ripped off - and the sooner government shows concern the better. Insurance companies and reinsurance companies clearly want to have their cake and eat ours, too. For decades New Zealanders have paid insurance premiums on the expectation that the companies they deal with have accurately priced and managed risk, that they knew how to properly manage their industry both domestically and internationally and priced premiums accurately.
The insurance industry of course has failed miserably to properly manage their affairs, and now these doyens of the free market and capitalism are leading a stampede away from their much-extolled principles.
In short, these businessmen have screwed up in circumstances where the free market demands that they, not we, should pay for their aberrant behaviour. Over the years they have stashed away massive profits and neglected to store up funds for a rainy day - which should be the very essence of their industry. The sooner we collectively reject their venal, hedonistic behaviour the better.
Many decades ago the leaders of this country, regardless of political persuasion, set up our own insurance company to save us from the exact circumstances that beset us now. Modern political leaders thought it smarter to sell it off. They argued private industry could handle it better and cheaper.
In May of 2011, if we are not careful, and there are no signs that we have been, then the insurance industry will, unchallenged, have exacted the biggest price increases that our economy has witnessed in modern times. That must be the "triple whammy" Chris Ryan was referring to. Premiums will go up and, guess what - they will not come down again.