ICNZ calls for overhauling fire service levy system amid rising costs

ICNZ calls for overhauling fire service levy system amid rising costs | Insurance Business New Zealand

Insurance News

ICNZ calls for overhauling fire service levy system amid rising costs

Industry’s argument lies in upcoming levy increase

Insurance News

By
Roxanne Libatique

In the evolving discourse on the financing of New Zealand’s fire and emergency services, the Insurance Council of New Zealand (ICNZ) emerges as a central figure, advocating for a major overhaul of the current levy system.

This system, which funds Fire and Emergency New Zealand (FENZ), is facing criticism for its disproportionate impact on insured individuals and businesses.

ICNZ slams FENZ levy increase

According to Interest.co.nz, the heart of ICNZ’s argument lies in the upcoming levy increase, slated for July, which aims to address FENZ’s projected financial deficits.

Currently, the levy is applied at a rate of 10.6 cents per $100 of insured value, but this will escalate to 11.95 cents. This increase notably affects insurance policies covering fire risks across New Zealand, sparking concern from the ICNZ, especially regarding the financial implications for apartment owners due to the lack of a cap for commercial and mixed-use buildings.

ICNZ CEO Tim Grafton said the system is unfair because it obligates only those who insure their properties to bear the costs of FENZ’s services.

“[FENZ] responds to all New Zealanders when the call comes,” he said, as reported by Interest.co.nz. “That means that there are a number of people who free-ride on the situation.”

ICNZ calls for funding FENZ through general taxation

Despite the levy constituting 97% of FENZ’s revenue in 2023, with a governmental contribution of $10 million annually, the ICNZ believes this model is unsustainable. It proposed a shift towards funding FENZ through general taxation to ensure a fairer distribution of the financial load and to alleviate the burden on policyholders.

The ICNZ’s stance gained traction amid a broader discussion on the equity of the levy system, following stakeholder feedback that echoed concerns about the fairness of charging policyholders for services that may extend beyond their insured properties. This feedback underscores a widespread sentiment that the financial model for supporting FENZ needs re-evaluation.

While the DIA has indicated no immediate plans to deviate from the insurance levy system, the ICNZ continues to push for a comprehensive review and restructuring of FENZ’s funding model. The council argues that a more equitable approach would relieve insured individuals from the disproportionate fiscal responsibility they currently shoulder.