Friday, June 10, 2011

A failure of regulation

Back in April, Queenstown-based Western Pacific Insurance was placed in liquidation after the Christchurch earthquake. The core problem? It had written out more insurance than it could cover, leaving a multi-million dollar shortfall and innocent people out of pocket. But it gets worse. Much worse. One of their directors had been blacklisted in Australia for misleading clients. And the company had written out $7.8 billion of life-insurance and product liability policies with no reinsurance to cover them.

Reading that, I'm left asking how the hell it could have been allowed to happen. Don't we have laws and regulations against this sort of thing, designed to stop insurance companies from taking people's money without being able to cover the policy if it comes due? If not, we bloody well should have! And if we do, then there's still a serious question of how Western Pacific was able to ignore them.

Either way, this is a serious failure of regulation and the government's duty to protect consumers from fraud and sharks. And I'd like to know what they're going to do to stop it from happening again.