NZ opens door to fire services funding review

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13 August 2012

The New Zealand Government has announced a review of the country’s fire services, which receive funding via levies on insurance policies.

The Insurance Council of New Zealand (ICNZ) is hoping that the insurance levy will be removed, although this is not raised in the review’s terms of reference, which discuss improving the levy rather than abolishing it.

CEO Chris Ryan told insuranceNEWS.com.au that ICNZ will make a submission arguing for the levy’s removal.

The Insurance Brokers Association of New Zealand (IBANZ) also wants a complete overhaul of the funding model so all New Zealanders contribute to the cost of fire services.

CEO Gary Young says he is concerned that while the review panel will consider more equitable funding mechanisms, “the future options are to continue to be based primarily on a levy on insurance contracts”.

“The challenge here will be to convince the Government not to just fiddle with the current system,” he says in a note to brokers.

Internal Affairs Minister Chris Tremain will appoint an independent panel to assess options for funding the fire services.

“Funding needs to be stable, equitable and predictable,” he said.

The review will provide recommendations for how the insurance levy can be improved and whether there are other viable funding sources.

The insurance levy is 0.76%, with upper limits applying for residential buildings, domestic contents and motor vehicles up to 3.5 tonnes. It raises around $NZ320 million ($246 million) a year.

New Zealand has urban and rural fire services funded from two separate systems.

The NZ Fire Service Commission and New Zealand Fire Service are funded almost exclusively from the insurance levy but the Government says the Fire Service is increasingly called to attend non-fire emergencies where it sometimes overlaps with the roles of other emergency services.

“Funding arrangements for fire services do not align with the functions undertaken, and do not necessarily provide a stable and sustainable base,” the review says.

The 76 rural fire authorities are funded mostly through council rates or funds from the Department of Conservation and NZ Defence Force.

Mr Young says it is the second review within 10 years and previous efforts have failed to produce a more equitable funding model.

“We only have to look across the Tasman to the Australian states, where virtually all have realised that funding through an insurance levy is inequitable and a highly inefficient tax,” he said.

The review will also consider the operations of the fire services and how they interact with other emergency services.

The panel will report by December 11.