The Insurance Brokers Association of New Zealand (IBANZ) has taken the country’s fire service to the High Court for clarification on how insurance contracts can be arranged.

IBANZ is seeking a declaratory judgement on whether groups of insureds can form collectives to arrange insurance and whether policyholders can take three-tiered policies to reduce their fire services levy.

The court heard two days of argument last week and reserved its decision.

The judgement is not expected for a couple of months, which means it may coincide with a report by a committee reviewing the fire service’s operations and funding. The committee must report to the Government by December 11.

Insurance levies fund 95% of the NZ Fire Service, from a charge of NZ7.6 cents (5.9 cents) per $100 on buildings, contents and vehicles.

The levy raised $NZ311 million ($244 million) in 2010/11 and although revenue collections have increased every year in recent times there has been a simmering dispute around whether brokers and insurers are using loopholes to avoid the levy.

The court heard brokers can bundle groups of clients into a collective to buy a single policy or set up a three-tier policy, separating indemnity cover that attracts the levy and buying excess of indemnity on top, creating a lower base for the levy calculation.