‘The consequences of getting that wrong is development that can’t be insured’: New Zealand’s largest general insurer, IAG NZ, says on RMA reforms

New Zealand’s largest insurer, IAG NZ, says there’s ambiguity in reforms to the Resource Management Act around proportionality and risk-based planning.

And the consequences of getting that wrong, IAG NZ’s executive manager of corporate relations Bryce Davies says, is development that can’t be insured.

New Zealand’s largest general insurer, IAG NZ, trades under the AMI, State, NZI, NAC, Lumley and Lantern brands. It also provides general insurance products sold by ASB, BNZ, Westpac and The Co-operative Bank.

Davies and IAG NZ’s government relations manager Andrew Saunders appeared before Parliament’s Environment Committee on Thursday, to speak about the insurer's submission on the RMA reforms.

One particular section in the Planning Bill stood out to IAG NZ. Focused on goals in clause 11, a sentence about managing natural hazards says the aim is “to safeguard communities from the effects of natural hazards through proportionate and risk-based planning”.

Saunders told the Committee the use of the word “proportionate” appeared more like a standalone concept rather than being integrated with risk-based planning.

“We think it is supposed to be ‘proportionate to the risk’ but it doesn’t quite necessarily say that.”

He says they did propose alternative drafting.

“Really, it’s just the idea that it needs to be proportionate to the risk.”

Davies says the Bill had a lot of the building blocks there; “to make good decisions but it doesn’t necessarily require a good decision”.

“We’re not sitting here saying we should be aiming to eliminate all risk. That’s a fool’s errand.”

“We’re never going to achieve that but there are sensible, rational, economically wise choices that we can make and want councils to make in a consistent way across this country to … kind of bend the curve … on natural hazard risk,” Davies says.

“As we grow, we create more risk, right? It’s inevitable but what we should be doing is proportionally creating less risk over time.”

“We should be making better decisions over time and we believe that needs a lot more kind of much more intentional approach and that intentionality needs to be part of this Bill,” Davies says.

Asked by National MP Catherine Wedd, who is also chairperson of the Environment Committee, what an example was of where the wording around ‘proportionate’ and ‘risk-based planning’ may not work or create worse situations, Davies says: “The consequence of getting that wrong is development that can’t be insured.”

“Or it becomes really expensive and it interrupts people’s ability to service their lives.”

“All the classic cascading impacts of expensive insurance and insurance that is not available … flows through into banking and flows through into people’s economic wellbeing,” Davies says.

While getting that wrong individually is one thing, Davies says: “If you start to get that wrong at an area-wide level for whole communities, that has a very profound effect and a cascading effect over the long term.”

“Especially when we’re making choices here under this Act that are going to last for a very, very long time.”

Davies says the success of this Bill requires “clear system goals, clear national direction about what is an acceptable level of risk, consistent high quality hazard data and models, and sufficient capability to be able to implement all of them”.