New Zealand will review the funding of its fire and emergency services after acknowledging problems with using an insurance-based levy.

Fire and Emergency New Zealand (FENZ) was formed in 2017 through the amalgamation of rural and urban authorities. Revised levy arrangements due for later introduction were set to remain based on insurance.

Internal Affairs Minister Tracey Martin says there are a number of different funding regimes for fire services internationally, but there appears to be a trend away from insurance-based levies and four Australian states have moved away from that model.

“FENZ, like the fire service before it, is funded by a levy on property insurance and there are flaws in insurance-based funding,” Ms Martin said today.

“We will be looking to achieve a model that is stable, universal, fair and flexible. No single option will fully satisfy all of these criteria, but I think we can do better than what we currently have.”

The Insurance Council of New Zealand (ICNZ) says the levy is imposed only on people who take out insurance to protect their homes, contents, motor vehicles and other property.

“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,” ICNZ CEO Tim Grafton said.

“This is now an opportunity for the first time in many years to get this right. Hopefully, all parties will support change to a fairer system.”

A new levy regime was due to take effect from this July that would have widened the insurance collection base, but the Government last year delayed its introduction.

Ms Martin says she heard concerns from large property owners who were facing substantial increases.

“While the modernised regime would improve equity across levy payers it appears that it may unnecessarily impact New Zealand businesses and other large property owners,” she said.

“The Government considers that there may be better ways to fund such an important organisation.”

Insurance Brokers Association of New Zealand CEO Gary Young says the levy collection is a “huge imposition” and changing systems to meet proposed new arrangements could have cost the industry about $NZ40-50 million ($37.9-47.4 million).

“IBANZ and ICNZ have worked long and hard on this issue and it is very rewarding to at last have the Government prepared to listen and act on our concerns,” he told insuranceNEWS.com.au.

The changes due to be introduced under the FENZ Act will now be delayed until 2024 to allow time for all the options to be considered.

“The announcement of the review means that present arrangements will largely continue, and people will not notice any difference to what they are paying in levies for the immediate future,” Ms Martin said.

A public discussion document on the FENZ funding model will be released later this year.