How can such a great country as New Zealand get it so wrong?

Kate Sheppard who along with Sir John Hall and Sir Julius Vogel led the fight to get women the vote in New Zealand.

Of all the countries in the world, I admire New Zealand  more than any other. Their political leaders were, in 1893, the first in the world to give women the vote. It is the country that nurtured the pure genius of Nobel Prize winning scientist Ernest Rutherford. No such list would of course include the bravery and determination of Sir Edmund Hillary. Rutherford and Hillary both being childhood heroes of mine. Of course, you cannot overlook sport, where New Zealand more than any other country punches, not just a little, but way, way above its weight.

Source: http://www.mch.govt.nz/perspectives/earthquakes/

Due to the earthquake exposure that the country faces and the huge amounts of foreign capital that has been injected into the country through insurance and reinsurance, you would be hard pressed to find a government that should not understand the benefits of a community that is adequately insured.

So with this short two paragraph opening, I sit here and think where have the great leaders and thinkers, particularly in government and Treasury, gone in New Zealand?

How can just over one hundred years ago, New Zealand be one of the most forward thinking progressive societies in the world and yet today be one of the very last in the world to realise that funding the emergency services through insurance, thereby significantly increasing the cost of such a vitally important service & protecting to the people of New Zealand’s home, businesses, communities and its very economy. It is so very WRONG!

A first-year economics student, if he has not heard it at school, learns that if you increase the price of any commodity or service, people buy less. Governments know this, that is why they tax alcohol and tobacco, so that we consume less and as a community we are healthier and are less a burden on society and the government health system.

But general insurance is not a burden on society or government. It is the exact opposite.

All the research around the world shows that when government overly tax general insurance, people buy less. They either reduce their sums insured, and/or fail to insure their contents or business interruption.

So let us take small business as an example. It is a huge employer in every country. The business owner sees the cost of insurance go up and so they do not insure their assets fully and decide that they will take a risk on business interruption. The business has a fire or massive storm. The business fails, the business owners lose their business and perhaps if the home is mortgaged, their home. The employees lose their job. Creditors do not get paid. Who is the winner here?

Now let us multiply this by the number of people in a small town. Everyone is in the same boat. Even if some insure fully but say, the draw card businesses that attract tourists or the big employer businesses are the ones that cut their insurance cost. An earthquake or other natural disaster hits. That community is devastated. The children and or grandchildren who were being funded into schools and universities by the business owners and their employees may no longer have the resources to fund the schooling. They cannot move into the family business because it is no longer there. These people get into a cycle of poverty that they cannot get out of, not just for one generation but many.

The sea of for sale signs following a natural disaster where the owners were not adequately insured

Think I am exaggerating, go and visit some of the small towns in Victoria that were wiped out in the ‘Black Saturday’ bush-fires and see the devastating effect on those communities, brought about by a greedy government that ate the golden goose through heavy unsustainable fire service levy. It took the loss of 173 people, many of whom stayed back to protect uninsured homes, farms and businesses before Victoria removed the levy.

I do not want to labour the point, but in my experience in insurance claims, which is fast approaching a half a century, even a prudent business person who understands the value of a quality insurance program will cut back when they see the price go up substantially. While they may keep their existing sums insured and business interruption insurance they will not increase the existing covers and/or not take out other covers such as cyber insurance which is now vital in our digital age.

Every civilised society needs well-funded, well-trained, well-equipped and well-led emergency services. The brave women and men that undertake this vital work for us deserve our full support.

The simple fact is that every single New Zealander and even those that visit the country benefits from the great work that the New Zealand emergency services provide. Every New Zealander needs to contribute their fair share, not just those that are prudent and risk averse enough to insure.

The broader the tax base for the collection of the funds to meet the cost of running the emergency services, the better. The best way known is through property rates. This way, everyone pays, including the visitors to the country through a small charge on every product and service they consume based on the cost to provide that service.

There are many papers and articles written on the subject on just how regressive taxing insurance is. Here are just a couple if you would like to read more from experts in equitable taxation:

By KPMG: https://home.kpmg.com/au/en/home/insights/2015/12/tax-reform-property-services-tax-stamp-duty.html

By Deloitte:  http://www.insurancecouncil.com.au/assets/report/Deloitte%20Access%20Economics%20-%20Impact%20of%20removing%20stamp%20duties.pdf

Brexit campaign slogan

I am sure that politician’s the world over are looking at what is happening in the world today with Brexit, President Trump, etc and scratching their heads and asking why?

The simple answer is that people are moving away from political parties who are not listening to their genuine concerns, not being honest and not protecting their precious way of life.

Having a hidden tax on insurance is NOT honest, it is NOT protecting the hard-earned wealth of its citizens and it is certainly NOT protecting New Zealand in the way that it deserves or needs in the 21st century.

The great country and its fantastic people of New Zealand deserve better.

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