The logic for an income insurance scheme was brought into policy debate again (this isn’t the first time) by the pandemic.

As several tens of thousands of workers were let go from travel and hospitality sectors a temporary safety net was provided at a level above that for normal unemployment benefits.

That brought both praise and criticism from both the left and the right. Perhaps the best argument in favor of such schemes is simply that events such as pandemics are hard to insure – social goods that are hard to provide for in another way are usually the proper realm of government. Having said that, these proposals include income cover not just for mass redundancy, but the more specific types, and, for loss of income due to sickness. 

Strong arguments exist that some contingencies should be covered by savings.

Savings are marvelously flexible – if you don’t use them for one thing, you can use them for another.

Generous safety nets can create hazards which depress private savings further causing other problems. 

Another is that by squeezing out the private sector, you can reduce the size of the productive economy.

Competition between insurers often yields efficiency and innovation.

Arguments back will cover the ideas that single, state-run insurers, such as the entity we usually call ACC, are very efficient. There are schemes overseas with which comparison can be made. 

One particular concern for income insurers is that the government proposes to take the best bit of the income protection risk and leave the worst bit: long term income claims.  

Do take the opportunity to read the proposals and give feedback, if a whole submission is daunting, then co-operating with your industry body is a great way to participate. If nothing else, some clients may bring up the potential scheme and you should know about it. 

https://www.mbie.govt.nz/about/news/proposals-released-for-a-new-zealand-income-insurance-scheme/