5,000 uninsured homes damaged in Canterbury disaster prove Labour’s plan is only way to ensure coverage

It is easy to sympathise with Local Government NZ's misgivings about the Labour Party's plan to take Earthquake Commission levies off insurance premiums and add them to rates bills. Local councils are always under pressure to justify rate increases, and the last thing they need is an added cost. But whatever the tarnishing of the local government brand, that does not make Labour's policy wrong. The Christchurch earthquakes offered definitive proof that the change is necessary.

If not, the problem created by uninsured householders is likely to increase. And it is those who have gone to the trouble of insuring their properties who will pay the cost.

Something like 5,000 uninsured houses were damaged in the Christchurch quakes. The owners, for whatever reason, had taken the chance that they would not require cover for such a catastrophe. This presented a dilemma for the Government. Compassion demanded that the uninsured received some financial help. But, as the Prime Minister noted, "the very strong message we need to send to New Zealanders is that they need to have insurance".

In the end, the uninsured were bailed out to the extent that those facing "true hardship" and not eligible for direct state assistance were able to seek assistance from a newly established mayoral fund.


The Government was not the first to partly open its cheque book. Its predecessor provided handouts to the owners of homes seriously flooded in 2004 in Manawatu and the Bay of Plenty. It, too, noted that this was an untenable situation which only encouraged people to believe cover was not a necessary precaution. But a review of the situation ordered by it came to nothing. The Canterbury quakes served as the trigger for another review, this time of the Earthquake Commission Act and led by the Treasury.

The review's existence was used by the Earthquake Recovery Minister, Gerry Brownlee, to suggest that the situation was well in hand. Labour, he suggested, had been caught napping rather than coming up with new policy. What Mr Brownlee neglected to point out was that nothing of great substance has emerged from this review almost two years after its start. Or that it was originally envisaged to be the catalyst for the introduction of amending legislation in the middle of last year.

It is difficult to understand the delay. The objectives of the latest review include minimising the fiscal risk to the Government associated with private property damage, and minimising the potential for house owners to experience socially unacceptable distress and loss in the event of a natural disaster. Both point towards the desirability of shifting the $207-a-year EQC levy from insurance premiums to rates bills to ensure universal coverage. As much has been advocated by the Insurance Council for the past decade.

Once, a government might have hesitated to impose such compulsion. But the extent of the problem in Christchurch has surely put paid to that. The qualms raised by Local Government NZ also do not bear close scrutiny. It should not be too difficult to persuade ratepayers that this is the way the EQC levy, and the Fire Service levy for that matter, should be collected. It is, after all, a matter of fairness. The burden of relief for the uninsured should never again fall on taxpayers, the majority of whom have voluntarily taken out insurance.