The Insurance Council of New Zealand (ICNZ) says a proposal to more than double the Earthquake Commission (EQC) cap to deal with quake-prone Wellington’s problems could lead to “perverse outcomes” and would be inequitable.

ICNZ says the proposal flagged by the Wellington Insurance Taskforce to raise the cap to $NZ400,000 ($374,348) is disproportionate to the issue, is based on a lack of evidence, and would cut private insurance competition and the benefits that brings.

“The taskforce has met just three times and undertaken very limited deep or broad analysis,” CEO Tim Grafton said.

“ICNZ and insurers have separately engaged with the Treasury to provide as much information as possible to inform decision-making and have discussed a wide range of options to address the as-yet unquantified unaffordability issue.”

The taskforce, chaired by Wellington Mayor Justin Lester, will submit recommendations to Finance Minister Grant Robertson by the end of the month.

Other proposals include building reforms, more transparency from insurers on premiums, an investigation into the role brokers play in setting premium levels and a portal to make property risk information available to the public.

The taskforce includes representatives of GNS Science, Engineering NZ, body corporates, property developers and ICNZ.

Mr Grafton says raising the residential cap from $NZ150,000 ($140,381) would mute pricing risk, leading to outcomes such as poorer building quality or converting commercial space to residential to benefit from subsidies.

The state-owned EQC insures residential buildings up to the cap level, with damage above that level covered by the private companies.

Insurance Brokers of New Zealand CEO Gary Young says his group has not been invited to participate in taskforce meetings and it is “ironic that they have just realised brokers play an important role” in the marketplace.

“The reality of the situation has to be faced up to,” he told insuranceNEWS.com.au. “There needs to be a greater understanding of what role insurance can play.

“Better information on risk and hazards would certainly help the public in this respect.”