Barry Soper: Insurance in New Zealand isn't a business for faint hearted

Deputy Prime Minister Winston Peters. Photo / Mark Mitchell

It's right up there with Donald Trump's 3000km wall to keep the Mexicans out. It's the sort of populist puffery, pandering to the ignorant.

Winston Peters is a politician with infinitely more political experience than Trump so he should know better.

Insurance giant IAG lays off 100 staff and relocates their jobs to the Philippines. It doesn't take a rocket scientist to deduce these aren't top of the range, highly skilled positions - they're call centre jobs and whether we like it or not, we live in a global environment.

Peters' response? Start a state owned insurance company, which on the face of it might sound like a fair proposition but in reality it's right up there with the wall.

Insurance is about risk, about us spending money for peace of mind in the hope that the policy will never be realised. With New Zealand being the third highest risk prone country in the world after Bangladesh and Chile, insurance isn't a business for the faint-hearted, let alone anyone with any business acumen.

You insure against risk and the company carries that risk and if it's government owned, then we own the risk.

Just look at what happened to the NZ policyholder owned AMI which was uncompetitive and went belly up after the Christchurch earthquake costing the taxpayer in excess of $1.5 billion. And on that shaky platform, consider the Earthquake Commission, a niche government owned insurer, still to pay out on many claims from the Kaikoura rumble more than a year ago.

Since then premiums have gone through the roof but that filthy lucre doesn't go into the pockets of the insurance companies, that's to pay the big risk takers offshore who effectively insure the insurers. AMI was a cut price insurer but invested less than 4 per cent of its premiums in re-insurance, whereas other companies spend well in excess of 10 per cent.

Companies assess risk, and with the two big quakes in this country, that risk is high which is why there's not a lot of enthusiasm in the insurance industry to even offer insurance, particularly for large commercial or apartment buildings where premiums have risen in some cases well in excess of a hundred percent since Kaikoura.

So unlike the late Jim Anderton's Kiwibank legacy, to give us an opportunity to line our own pockets rather than Australia's, on this one we should be happy to allow the Aussies to shoulder the risk, as they're currently doing.

If Peters really wants to pursue a wacky idea he should stick to his plans for compulsory New Zealand wool carpets!