Smith StuartSTUART SMITH (National—Kaikōura): Thank you Madam Deputy Speaker. It is a pleasure to speak to the Earthquake Commission Amendment Bill. It was a good process that we went through in the Finance and Expenditure Committee.As the Minister said we have a very high penetration rate of insurance in the New Zealand market. That is largely due—particularly for residential property—to the Earthquake Commission (EQC) and that is for a very good reason. So you could be forgiven for thinking that there is cross-subsidisation by having a flat rate for EQC which is actually true. It's called flat pricing or it can be a community rating that it can be referred to as. High-risk buildings and buildings in high-risk areas pay the same rate as low-risk buildings and buildings in low-risk areas and that's for a very good reason. If we don't have that system in place then we won't have the level of penetration in the market which inevitably when we have an event—say a Christchurch event—will lead to the Crown having to step in to ensure that the city gets back on its feet in a very timely manner. So the Earthquake Commission was brought in for very good reasons and it works really well. However it does need to be updated and this amendment bill is very timely.National will be supporting the bill as you might well have guessed by now but there are a couple of caveats that I would like to point out as we go through. Removing the contents cover and extending the residential building cover to $150000 perhaps counterintuitively actually lowers the exposure to EQC in a Wellington-type event and that is because in an earthquake a lot of buildings suffer from minor damage right through to catastrophic damage whereas in a tsunami or volcanic event buildings tend to be destroyed and not so many suffer only minor damage. By removing that contents cover and increasing the cap to $150000 plus GST it is a much better situation for those people who suffer damage but as I said it is counterintuitively a little less exposure for EQC.Getting that number right is about balancing where you shift the risk from the insurance companies to the EQC or the other way around and if we don't get that balance right—if it's too much risk on EQC—then that's bad for everybody in New Zealand. If we put it all on the insurance companies that raises the price of insurance making it unapproachable for many people who won't get involved. So I think $150000 when we looked at it in the select committee was the right number. There were a number of people who submitted who wanted it to be at $200000. However that I believe would not have been the right number. It would have put too much risk on EQC and taken it off the insurance companies. I think that the balance that we struck was right.With regard to extending the claims limit—the period in which you can make a claim—it was 30 days and it was extended to three months during the Canterbury earthquakes. This bill will extend it to two years. We had reservations about that and the submitters at the select committee also had significant reservations about that and I think for very good reasons. I think that what will have to go with this is a very good campaign to ensure that people realise they are really putting themselves at risk if they don't make a claim in a timely manner. There is the materially prejudiced caveat for the insurance companies—for EQC at least—and there's also the issue with their own insurance companies. If a claimant leaves their claim for a significant amount of time it can be quite difficult to ascertain what damage was caused by an earthquake and which particular earthquake and where the liabilities lie and that would be quite dangerous ground for a claimant to go down.Also I think in most insurance contracts an insured person if it's their dwelling and if they vacate that dwelling for more than 60 days—well it varies but in most cases it's 60 days—without informing their insurance company their insurance is in fact not valid. So the insurance company may not accept the claim. If they're a landlord they usually have to visit and inspect their property every 90 days. So this two-year period doesn't actually line up with industry practice and I think it is a bit dangerous going down that track. I understand totally the reason why we might want to do it—we all feel sorry for people who fall outside that—but we look at what happened in Kaikōura; where 99 percent of claims were all lodged before the three-month date. So it's a very small number that would be affected. However it's not good when it is and I accept that.What isn't in the bill which I think I would like to highlight is that in the Kaikōura event we had a memorandum of understanding (MOU) between the Earthquake Commission and insurance companies that wished to sign up to it where the claims were made to an insurance company which was then a claim to EQC. Currently as the law stands a claimant goes to EQC and makes a claim EQC assesses the claim and if it's over the cap they then have to go and join the queue and talk to their insurance company. It's a really silly process and it's slow and it slows everything down. In Kaikōura that was all worked around with the memorandum of understanding. It was recommended to be in the bill—a lot of submitters came to the select committee saying it should be in the bill. However as the Minister alluded to it will be apparently put in a later bill. However natural disasters don't wait for bureaucratic processes and I argue that it should be in this bill and I'm drafting an amendment to put it in there. I think it's really important that it be in there for everybody's sake.Also having insurance companies run the process and manage it is a much more efficient system where they actually have a far greater standing army than EQC does. So when a large event happens the insurance companies have all the processes in place to ramp up their effort to get around and assess those claims. But of course at the same time when that happens if we don't have that ability insurance companies are going to be competing with EQC for the same resources. Insurance companies are far better placed to do this and I would argue that we should have that in this bill. There's no reason to delay it. It's not that hard. All of the reasons that EQC put up against it were basically around audit and accountability processes. But insurance companies are not insurers on their own; they also take reinsurance so they have audit and accountability processes. Reinsurance companies from Switzerland or the UK where often they're based have very strict processes on their insurance assessments. They are randomly audited and all of the paperwork is gone through because those reinsurers don't want to pay up what they don't have to either. It's exactly the same as it would be for EQC so I think that's absolutely a silly argument because it's all covered and it was covered in the MOU. I know there were lots of random audits on those processes as there should be. Everyone should have those good processes in place to ensure that we all have confidence in the system.So as I said I'll be putting that amendment forward in the committee stage but we do support the bill with those caveats and I commend it to the House.