QUAKE INSURANCE

Dominion, Volume 37, Issue 123, 19 February 1944, Page 5

QUAKE INSURANCE

Extension To General Disaster Fund?

SOME DANGERS INDICATED

A number of important public questions arise in connexion with the expressed intention of the Government to legislate shortly for an earthquake disaster fund (says the Associated Chambers of Commerce of New Zealand in a statement issued yesterday). On November 20 last the Minister of I'inanee. Mr. Nash, stated: "On the reassembly of Parliament, it is proposed to extend the War Damage Act to cover earthquake damage, and to provide for all premiums at. 1/- per cent., the rate to cover both earthquake and war damage. The balance in the war damage fund on February 2S uext will still be conserved to cover war damage risks, .and, subject to appropriation by Parliament, coinpensation may, if required, be paid to covet damage against earthquake or other national disaster.” This statement, viewed together with provisions that exist iu tne War Damage Act, obscures rather than clarifies a number of issues that arise. At the outset it can be stated that even though earthquake cover can be bought locally from insurance companies, as New Zealand is peculiarly susceptible, to earthquakes that may have extensive repercussions, thus assuming a community character, there would be no general objection' to a national scheme being introduced by the State to provide compensation for damage from earthquake, provided such a scheme were soundly based, drawn up in accord with commercial principles, and equitably applied. But there is a possibility that these esentinl conditions may be departed from in the scheme that is ultimately placed before Parliament. The j', ar Damage Act, 194.1. was a measure which —quite apart from questions as to. the satisfactoriness of some of its provisions —at any rate provided a means of obtaining cover for property agaiust damage from acts of the enemy at a time when the danger in that respect was real and urgent. But now that the danger has passed, the fund that was built up by premium payments in respect of one specific purpose is to be used lor another purpose altogether—that of earthquake damage to which it is in no way suited, introducing thereby what will be serious anomalies unless they are guarded against. There is a wider issue, involving not only earthquake damage, but also any other national disaster, as indicated iu obscure terms by the Minister of'F inance. The existing War Damage Act itself is more explicit. Section 13 of the Aet specifically sets out that when all claims or outstanding claims against the war damage fund have been settled, and all advances have been paid, any moneys remaining “shall be applied in accordance with the appropriation, of Parliament for the purpose of granting financial assistance to persons suffering loss or damage bv reason of any earthquake or other disaster.” This introduces a principle which could have very far-reaching results fraught with injustice aud inequity to large numbers in the community, if the present structure of the Act with regard to finance is to be adhered to when proposals extending its operation are brought down in Parliament.

All Who Benefit Should Pay Apart from earthquakes for the moment, what constitutes a disaster. A storm which damages a local orchard may bo disastrous in the eyes of the orchardist, wbo may cause his local member ot Parliament to see with similar eyes, so that there is consequently lodgment made of a claim for relief from what,may soon become an All Purposes 1< uud, besieged by.claimants for compensation in reaped; of damage by local flood, fircbhght, eczema in sheen, collapsed bridges, frost., and generally by the visitations of I evidence or the ravages of decay and neglect. To make benefits from the fund available to all while the wherewithal . was provided by the few. would be iniquitous. An essential and fundamental- requirement of any such universal scheme would be that any fund to benefit the whole community must be raised from the whole community, not from the few’The existing fund under the Mar Damage Act was established for a limited purpose for the benefit of a limited, section.- That is to say, only holders of fire insurance policies on property arc covered by it. tliev being insured, on payment of a flat rate premium, in respect of damage to property, that may • be caused' bv enemy action. In other words, there are benefits only for those who pay in. It would be altogether wroii".Jf, bv a legislative amendment. those”who arc at present paymg— tha t is property-owners carrying fire insuran .. —continue to be thn only ones Providing the fund, while those, who collect are extended to include virtually all and sundry, through making this fund apply to damages from any disaster not re motely connected with, the risks of war. Separate. Direct Tax.

Even, if the creation of such a genera* disaster fund (though, authorized in the Act) is not contemplated, the same considerations apply to auy le S lsl^ u d tending the application of the war dam age fund to include damage by eartfiquake There is _a large volume ot property which is covered by fire insuranc: (and, in consequence, by war damage insurance) which is in no way subject to earthquake risk,,such as haystacks an' standing crops. iThe result of any sueli earthquake schwne grafted on to the War Damage Act would create the grave anomaly of collecting from a limited number of people the moneys necessaiy tu make good the damage caused to a wider body ot citizens. In the event ot the introduction of a general disaster fund, this inequitable result would oe accentuated, aud a small body ot. taxpavers—the property-owners—would ,oe called on to provide the means of rcue.. for all types of suffering. mi ~ The issue, is reduced to this: That all should contribute to a fund from wliicli all benefit, the statement concludes. An earthquake or other national disaster is a community calamity, the cost which should be met: by the whole community, and not by a section of it. A lie fact that there is a Mar Damage Ac. end a war damage fund is quite irrev?lant. This fund has a special and exclusive purpose—a- purpose which will not wholly disappear till the war. is over. Premium payments made under the Ac. should cease, and the fund should be pur on one side and left there. If there is to be an earthquake or other disaster fund created, it should be established altogether separately. Since it is to benefit the whole community, then it should be financed by the whole com munity. The only wny of effectively reaching the whole community is b” means of a direct tax similar to the national and social security charge, ano this should be the method adopted for financing the scheme.