Thursday, November 03, 2011

Question for the day: On the EQC

Given that both the Blue Team and Red Team were respectively defending the Earthquake Commission last night and and promising to give it even more money, here’s the question I’d like you to ponder today:

Is there any good reason for the Earthquake Commission to exist?

Here’s a few things about that question to consider:

  • prior to the earthquakes, the EQC was sold as the virtual investment arm of God, with an unlimited pot of money just waiting to repair everything; post-earthquakes however it turned out the pot was virtually empty, and what it mostly contained was government bonds, i.e., billions of dollars of IOUs payable by the taxpayer.
  • prior to the prior to the earthquakes, the EQC was sold as being the first port of call in an earthquake with the money to bail out home-owners. What people only realised after the earthquakes however (and quite why it took so long to figure it out, I don’t know), was that $100,000 doesn’t go very far these days.  And that waiting for it from a government department takes forever.
  • prior to the earthquakes, the EQC was sold as being well resourced and efficient; post-earthquake however it was discovered that EQC had to actually employ people to do the jobs of assessing and paying out on claims—jobs other insurance companies were already fully staffed to do.  From whence did EQC pull all their new employees to duplicate what other insurance companies were doing? From either those same insurance companies (denuding them of their own trained staff, and slowing down their work) or from the ranks of the illiterate and the innumerate (which explains the content of so many of EQC’s assessments).
  • prior to the earthquake, home-owners might have thought the $100,000 payout from EQC  would have been a supplement to their main insurance payout. Little did they know however that they would have to wait for the their main insurance payout until some time after the EQC had got around to deciding whether or not they would get one, and how much (if any). Which has meant months and months and months of delays, and tonnes and tonnes of paper as EQC proves once again that if you want delays and obstructions, then give your task to a bureaucracy.

So with that preamble, what do you think?

Is there any good reason for the Earthquake Commission to exist?

Yes, or no?

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18 Comments:

Blogger macdoctor said...

There are no good reasons for a government to be in the insurance trade. This statement would include that seething pile of bureaucracy known as ACC. If a private insurer won't touch it, the taxpayer should not be touching it either. Any government will step in with taxpayer dollars in a disaster. The trick is not to hobble those government dollars with a bureaucracy that is only geared to administer collections as you inevitably do with government insurance.

11/03/2011 01:54:00 pm  
Anonymous Mort said...

no, it should be scrapped.
it has proven beyond reasonable doubt that it is inept.
it is simply not upto the job
the reinsurance from 2012 onwards should be handed over to insurance companies, just like they did for commercial buildings.
EQC, be thee gone, for you are a temptation for govts to pilfer from, and in our time of need, are found wanting

11/03/2011 05:01:00 pm  
Blogger Right_Wing_Dad said...

No one has given me a good reason for keeping EQC in addition to a private insurance company. It was found wanting and should be scrapped. There is no justification for the government to provide this "service".

But we already know that...

11/03/2011 07:33:00 pm  
Anonymous Hal Incandenza said...

"If a private insurer won't touch it, the taxpayer should not be touching it either."

That's a nice way to describe people doc. Christ I'm glad you're not my GP.

"the pot was virtually empty, and what it mostly contained was government bonds, i.e., billions of dollars..."

How to contradict yourself completely in less than a sentence. Well done.

11/03/2011 09:28:00 pm  
Anonymous Mort said...

Hal, last time I looked a Bond was a promissory note written out by the govt at a set percentage interest rate with an expiry date.
So a govt agency invested real funds into promissory notes from a govt agency (treasury)
The treasury then spent the real money on deficit fulfilment.

THe amount of money if invested even at 5% per annum should have had the EQC sitting on real assets of $20B. But the cupboard was Bare. Where did the money go?? Oh thats right the govt filled the cupboard with promissory notes. Lets trade those in in our time of need....
Yo Keyster, we'd need some of that cash to sort out CHC....

Keyster: oh darn.... we are toast already, our budget was shot trying to maintain Labours bribes, and a welfare state beyond any reasonable realm of sanity, we don't have any cash to prop up your deficit, it don't work like that EQC. Shit we have to borrow over seas to finance the IOU.

SYSTEM FAIL
get rid of the EQC

11/03/2011 09:55:00 pm  
Anonymous Anonymous said...

Agree. If the EQC intent was risk mitigation, i.e. have a big pot of money ready for a major NZ national disaster. Then surely investing the money in NZ and the NZ Government in particular is beyond stupidity, really it's criminal negligence/incompetence but I bet no one gets called to account.

11/03/2011 10:28:00 pm  
Anonymous KP said...

Get rid of a bureaucracy?? Are you even on this planet?? Bureaucracies NEVER 'go', they are expanded, or re-intergrated, or re-modelled or... but NEVER got rid of! I'll bet we are still employing the people who worked for Adolf the Goldfish! AND I'll further bet we will still be employing the EQC in 30years!

11/04/2011 12:09:00 am  
Anonymous Maurice Winn said...

Cancel government insurance. For decades my assumption has been that insurance is not worth the paper it's written on. I have saved the insurance cost and invested it and can now afford to crash into a high value car and if the house falls down, I'll build a more modern one.

It's annoying to have the taxes I paid doled out to those experiencing earthquakes who didn't sensibly proportion their property to cope with what might happen. If they can't afford to replace their house, they should sell the land and rent. There is no reason for me to buy them a new house.

Communism doesn't work for food or shoe production and it doesn't work for earthquake insurance, as has now been proven.

If people want to buy earthquake insurance, Broken Windows Insurance is ready to oblige. Of course my price will not be as low as the communist version from the Keystone Kleptocrats, but it would actually pay out as agreed without robbing other citizens to do the paying.

The Keystone Kleptocrats first fund their personal lifestyles before setting funds aside for investments to cover the insured. As usual, the amount they "invested" turned out to be inadequate and the payout process hopeless.

11/04/2011 06:04:00 am  
Anonymous Hal Incandenza said...

Are you guys deliberately obtuse, or just a wee bit silly? Serious question. The only insurance company to fail was a private one. EQC has met its obligations. You seem to be occupying some sort of bizzaro world where the opposite occurred. I know you have to cling to the notion that free markets are perfect for philosophical reasons, but I understood you actually purported to have some sort of respect for reality.

As for the wisdom of investing in government bonds, I'm unconvinced it's a good idea from the point of view of risk management, but the reasons behind it are logical enough.

11/04/2011 02:38:00 pm  
Anonymous Craig said...

You would have to be pretty deluded to think that "EQC has met its obligations". Over a year has gone by and many claimants still have not been paid for damage done in the September earthquake, let alone the February one. The EQC does not have the staff or the infrastructure to cope with a major earthquake and now that the pot is empty, it is the right time to be asking whether the EQC should continue.

There have been two insurance organisations that are trying to "meet their obligations" through a taxpayer bailout - AMI and EQC. Both deserve to fail.

11/04/2011 07:04:00 pm  
Anonymous Mort said...

the EQC can't settle its obligations because there is no money in the cupboard. The IOUs are waiting to be honoured.
Keyster and DDoD don't have it cos they blew it continuing the Promises of Helengrad rather than offer anything that resembled fiscal prudence, and budgetary restraint....

EQC isn't going to see any money anytime soon, so people will wait another year to get paid out and in some cases 3-4 years. If thats your definition of obligations met, send me a cheque for $100 and I'll send you a verified certificate of title to a 1000 ha of Mars.

11/05/2011 04:38:00 am  
Anonymous Hal Incandenza said...

"The EQC does not have the staff or the infrastructure to cope with a major earthquake..."

Shit, really?? They should have had hundreds if not thousands of staff waiting around, fully trained and getting paid just in case, just like all the private insurers didn't.

Where's your evidence there's "no money left in the pot"? The only insurer that's gone under was a private one.

11/05/2011 06:22:00 pm  
Anonymous Craig said...

"They should have had hundreds if not thousands of staff waiting around" No they shouldn't, however, private insurers do have trained staff and can respond quicker than building an entire claims system from scratch. If the damage is more than $100,000, then claimants have to have their property assessed by EQC as well as their own insurance company - a double up process that has delayed payouts.

No money left in the pot? Well Standard and Poor's is counting on the government bailout process when assessing EQC financial standing.

EQC keeps rating despite blow-out

11/05/2011 08:30:00 pm  
Anonymous Hal Incandenza said...

"...private insurers do have trained staff and can respond quicker than building an entire claims system from scratch."

They didn't have to do that.

"Standard and Poor's is counting on the government bailout process when assessing EQC financial standing."

Ah so the EQC is good for it then, and is able to pay out on all legitimate claims. Thanks.

11/05/2011 10:04:00 pm  
Anonymous Craig said...

Thanks for what? If you mean good for it because the government will bail them out, then the EQC is as "good for it" as AMI was.

11/05/2011 11:53:00 pm  
Anonymous Hal Incandenza said...

AMI didn't have a government guarantee. The government gifted them one when the market failed.

11/06/2011 08:04:00 am  
Blogger twr said...

Weren't you told to fuck off months ago Judge?

11/06/2011 09:53:00 am  
Anonymous Anonymous said...

What we have here in Christchurch after the earthquakes is a nest of corruption and incompetence. The EQC is at the top of the list. What do you do when you need a team of about 5-600 building assessors? Well apparently you don't hire people with building experience and knowledge, of which there would be no shortage available in the CANTERBURY area...shit no, you hire people with empathy and understanding and most of them with no clue how to assess a damaged building, and preferably hire people from as far away as possible...Australia, Auckland etc etc. Oh, and then pay them more money than they have ever seen in their lives e.g. $75 to $110 per hour and put them up in places like the Chateau on The Park or the George Hotel....Oh yes lets not forget the $75 a day on top for meals....Jesus wept...no wonder the place is fucked...it's being fucked over by these pack of useless, nil, fuckwits!

12/05/2011 06:58:00 pm  

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