Sunday, September 5, 2010

SERIOUS QUESTION - AND I DON'T HAVE THE ANSWER

In the wake of yesterday's earthquake there are likely to a substantial number of home owners (let's for the moment restrict this to home owners) who are under insured or have no insurance at all.

Some of those homes will have to be demolished while others will require a substantial rebuild.

Question .... does society have a responsibility to help those who by omission or commission have contributed to their own misfortune?

Well we do in many other instances i.e. the drunk driver who injures him/herself.

Do we just say to the family involved "on your bike down to the nearest HNZ office and get your name on the waiting list and buy a tent until your number comes up" or, should the State adopt a much more proactive and innovative response such as offering suspensory loans, secured against the property (where sufficient equity remains) to be repayed at some future date.

Not easy and I can think of as many cons as pros.

Interested in your thoughts though.

29 comments:

Adolf Fiinkensein said...

Whether insured or not, the home owners will need emergency accommodation of some sort. I'm not sure that private insurers pay for such. (Not being fire and general person)

There is no question we have a responsibility to see that nobody is left to freeze to death in the streets but equally authorities need to ensure that people receiving state help have used up every last penny of their own and their immediate family members resources, including those tucked away in family trusts before such help is offered.

In the meantime, yes let them live in tents. That what refugees elsewhere in other third world countries do.

Anonymous said...

so the people who actually prepared for this type event by buying insurance get stung twice, first through meeting their obligations under their various mortgages and paying their premiums, and then again through increased taxes. It is a tragedy, but unfortunately certain choices have ramifications. Any loans made available from the government should be at the same rate of interest + a small handling fee/ commission to allow them to rebuild. It is a hard lesson, but one that needs to be taught.

Anonymous said...

there will be some interesting negotiations going on, and Key needs to learn from the mistakes of Krudd/ Giltard when issuing contracts for the repair of state owned facilities. There is the scope for some providers to be adding a lot of fat into the contract price if the govt negotiators aren't prudent.

Adolf Fiinkensein said...

Yes, I would favour some form of gummint loan at commercial rates,secured behind existing bank loans over the property in question but only where there is suffiient equity to prevent total borrowing exceeding 90% of value. sell up and get in line down at HNZ. You are the sort of bludgers for whom it is designed.

Cactus Kate said...

So you can afford to own a home but you can't afford or be responsible enough to buy basic insurance?

I can understand why a tenant would not have insurance to cover this disaster but the homeowner?

Cactus Kate said...

The drunk driver by the way is not such a good comparison. ACC covers such and levies are paid. Regardless of the crassness of the example the drunk driver through a "no faults" ACC scheme has already paid for their damage via insurance.

WWallace said...

Insurance, as originally designed, was to cover the small risk of a huge loss.

People need to learn the consequences of not having insurance. As Adolf wrote, people assisted by the state must use up every last cent of their own money first, in attempting to remedy their own predicament (ie be bankrupted, if necessary), before any taxpayers' money is available to help them into whatever emergency housing is available.

Newspaper stories highlighting the "riches to rags" situation of such non-insurers might convince others of the need for adequate insurance cover to avoid complete poverty.

(I do not benefit in any way from the insurance industry.)

KG said...

"..people assisted by the state must use up every last cent of their own money first, in attempting to remedy their own predicament (ie be bankrupted, if necessary), before any taxpayers' money is available to help them into whatever emergency housing is available."

Fine...except that welfare bludgers will be housed despite them having contributed stuff-all.

Redbaiter said...

"Question .... does society have a responsibility to help those who by omission or commission have contributed to their own misfortune?"


Of course, but why do you immediately jump to the conclusion it should be provided by means of government? I'll tell you- because you're a damn commie.

Anonymous said...

A very public "No house insurance? Tough titty." approach might in fact if not eliminate the problem of home owners not insuring once and for all, severely make a dent in it for whenever this sort of thing happens again. And it'll happen again.

Sobbing on TV about how you were uninsured and hoping for a hand-out afterward is something I've had enough of seeing.

pdm said...

The problem with Fire and General or in this case House and Contents Insurance is this:

Too many people base their cover around the cost of the premium rather than the potential claim.

I always said to my clients `to not worry about the premium because the value of the cover is at claim time'.

Unfortunately not all took that advice but fortunately I had only one Christchurch client and he sold the property covered about 18 months ago. Mind you he did have cover based on the potential claim so would have been okay.

Bartholomew Longbottom said...

The houses that got the most damaged in Chch were brick houses. If you have a brick house then you're likely to be wealthy. If you're wealthy and you don't have basic house insurance (already subsidised, in effect. by the EQC) then you don't deserve state help.

If, nevertheless, the state does decide to help the people that don't need it (again), that "help" should be on commercial, arms length terms. But which I mean mortgages at the standard rate + risk premium.

The Veteran said...

Redbaiter ...I object to your comment. As I said, I don't have an answer and there are at least as many cons vs pros to any suggestion that the State should step in over and aboce the existing welfare net.

I think the majority of comments re this post provide the answer.

Why do you throw labels around so readily when all I was looking for was posters to debate the isuue?

sad

Anonymous said...

I work in the insurance industry.

Insured and reasonable people will find the process and contractual response, including meeting temporary accomodation costs, professional with insurance people, many of whom will be away from their own homes and families for weeks at a time, trying hard to be helpful. No overnight miracles but it will happen.

As for the ranting assholes - go to the back of the queue. These are times for people to think of someone else for a change and it will , in my long experience, be the old poor to middle class who do it best. It seems there is something in having coped with hardship in your life that equips people to deal with it again. They are often inspirational.

As for the uninsured - form your own queue somewhere else and borrow the cash to rebuild or seek a benefit advance to pay back. There is no free lunch.

Tinman said...

My understanding is that many (if not most) of those insured are only covered partially for natural disaster - the figure I have been told is $100,000.

That'll buy a bloody great tent.

David said...

matthew shortarse - bullshit

There are plenty of current and ex state houses and cottages clad in brick (really timber frame houses) so as a material brick is not the province of the wealthy.

But an interesting question arises as to the state's priorities. Does a state house tenant deserve a priority in the allocation of (what will undoubtedly become) scarce building resources to fix a crack in the wall over thge needs of a privately insured houseowner?

Adolf Fiinkensein said...

Tinman

The general insurer to which I am contracted and which shall remain nameless but holds over 45% of the rural market in NZ has all its clients fully covered with 'top up' earthquake cover. That is to say, the EQC pays the first $100k.

What the practice of other insurers is, I'm not sure.

A glance at the Gummint accounts shows a reserve exceeding $6 bil in place for the EQC.

scrubone said...

Banks won't let you draw down a mortgage without proof of house insurance.

So if a house is not insured, that would either mean that the owner has violated the terms of their mortgage (fraud?) or hasn't got one.

So I'm guessing that contents insurance might be the bigger issue here.

Adolf Fiinkensein said...

scrubone, no the issue is the difference between the EQC limit of $100k and the true cost of the damage.

I imagine many banks will have mortgages over properties where the cost of damage will be way over $100k but 'top up' EQ cover was not included in the insurance package. In other words, full cover for fire but limited cover for EQ.

James said...

"Question .... does society have a responsibility to help those who by omission or commission have contributed to their own misfortune?"

No it doesn't."Society" is just a non-existent abstraction.Its the actually existing individuals who comprise it that have the CHOICE,but not the unchosen obligation ,to help these uninsured people out.And help we will...no question.Its from our own sense of benevolance and set of values each of us will assist as we feel we can.But there will be some who will not...and thats their right despite what the rest of us may think.

Im off downtown to the bank shortly to contribute a few bucks off my own bat in addiction to what the states going to steal from me also.

But yes a far firmer stance must be taken...I advocate for the maximum level of individual liberty poosible...with the counterbalancing maximum level of personal responsibility for the consequences of how they may use or abuse that liberty.

A decent amount of liberal Holland,a few tablespoons of Switzerland mixed with a hot but not too spicey dash of conservative Singapore would be how I see it....

Psycho Milt said...

"Society" is just a non-existent abstraction.

Yes, clearly it's impossible for an aggregation of individuals to form a larger entity that exists in its own right - why, if that were the case, surely the courts would recognise entities like "the people," "the Coca Cola company," "the New Zealand Army" and so forth, and give them legal standing. It's ludicrous to even suggest such a thing!

Adolf Fiinkensein said...

James, you poor bastard.

"...a few bucks off my own bat in addiction to what the states going to steal from me also...."

Why don't you get a credit card and go cold turkey?

The Realist said...

This is a difficult one - essentially because we all have sympathy for these people, whether we admit it or not. The central question is whether the state exists for the good of the individual, or whether the individual exists for the good of the state. National stands for the former, Labour for the latter. A National view would be that we do not help these people directly, but set up a safety net to stop them falling too far. Labour on the other hand would opt to hand out to them under any circumstance, which is why Socialism cannot work.

James said...

Milty: Yes, clearly it's impossible for an aggregation of individuals to form a larger entity that exists in its own right - why, if that were the case, surely the courts would recognise entities like "the people," "the Coca Cola company," "the New Zealand Army" and so forth, and give them legal standing. It's ludicrous to even suggest such a thing!

No new rights bearing entity comes into being just because individuals come together to pursue a mutral goal Milt...when 10 people form a group that doesnt suddenly create an 11th person...theres still only 10 people each with their individual rights.Any rights that Coke or the NZ army has are only those of the individuals comprising it...no more.

I gather then that you are happy to be dicatated to about your rights and freedoms by others simply because they are greater in number than you? Thats called democracy and its why people who support true freedom reject it as just totalitarianism in a dinner suit.

Psycho Milt said...

Believe it or not, the concept of "tyranny of the majority" is also familiar to people who aren't libertarians.

TooRight said...

The simple way around this is to remove the chance the uninsured benefits from moral hazard as much as possible. For the uninsured the state repairs the home and takes a first mortgage at commercial rates for the value of the work or replacement. The state is repaid from the eventual sale of the property before all other claimants including other mortgage lenders or the estate in the event the "owners" stay till death. In other words the "owner" cannot sell and transfer their wealth without first settling up the state. In the case of the state going ahead of an original lender they (eg a bank) should have been more diligent about ensuring the borrower had covered the loss risk.

Rob Carr said...
This comment has been removed by the author.
Rob Carr said...

Restructured for clarity:

I would say our coverage of people should be irrespective of their role in circumstances and simply focused on what will benefit society overall the most.

The important thing is to make sure the local economy gets back on its feet. Regardless of insurance status we should be providing emergency accommodation and I think relatively low interest loans for rebuilding simply so it can happen faster. Issues around repayment can be dealt with later, yes there will be some people get an unexpected "benefit" of not losing everything they own when they cannot make repayments but I don't think that should determine how we act now.

We should also definitely avoid those who prepared by getting private insurance for it paying for those who do not. To me this is simply solved though by making any assistance (beyond universal emergency coverage for the next few weeks for things like water/tents etc) in the form of loans rather than "free".

A very good question.

James said...

"Believe it or not, the concept of "tyranny of the majority" is also familiar to people who aren't libertarians."

I do doubt it...it seems its continually offered as a moral ideal in this country.