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The insurance industry applauded the Government’s recent announcement that it will be reviewing how Fire and Emergency New Zealand (FENZ) is funded.
Under the current system, the FENZ is funded by a levy imposed on the premiums of home, contents, and auto insurance. However, Internal Affairs Minister Tracey Martin said that there needs to be a stable and simple funding system that would be fair to individuals and businesses.
“The establishment of FENZ has gone well and New Zealanders are beginning to see the benefits of a modern, unified fire and emergency service,” said Martin. “For example, FENZ has responded admirably to the Nelson/Tasman fire.”
“However, FENZ, like the fire service before it, is funded by a levy on property insurance and there are flaws in insurance-based funding: property owners that do not insure are able to ‘freeride’, as they do not pay a levy but still benefit from FENZ’s services; charging people on their insurance increases insurance costs and can reduce the incentive for them to properly insure their properties; and levy collection is complex to administer for insurers, and FENZ’s levy income may become uncertain as the commercial insurance market evolves.”
“The Government considers that there may be better ways to fund such an important organization,” she concluded.
For its part, the Insurance Council of New Zealand (ICNZ) welcomed the announcement. "This is a grossly unfair tax that penalises people who try to do the right thing to protect their assets, lumping them with the cost of running FENZ while also supporting access to emergency services for those who choose not to insure," said Tim Grafton, chief executive at ICNZ.
"The Government has made the right call to review how to fund FENZ in a way that is fair to everyone, simple, low cost to administer and lines up with what happens in most other countries.”
