NZ fire services funding bill maintains insurance levy

New Zealand has called for submissions on proposed legislation introduced into Parliament that maintains an insurance-based levy to fund fire and emergency services while making changes to improve its operation.

The bill amends the Fire and Emergency New Zealand (FENZ) Act and extends the proposed start date for the changes by two years to July 2026.

FENZ was formed in 2017 through the amalgamation of rural and urban authorities, but legislation was passed in 2019 to extend transitional levy funding provisions to July 2024.

Labour Minister Damien O’Connor told Parliament last week that a 2019 review of funding arrangements had considered alternative approaches, such as a property-based model.

“We decided to stick with, and improve, the existing insurance-based model over this alternative,” he said. “This reflects the fact that the insurance-based model remains fundamentally fit for purpose and the least costly to implement for stakeholders.”

Insurance Council of New Zealand (ICNZ) CEO Tim Grafton says it has long been the group’s position that it is inappropriate to fund FENZ thought an insurance levy and the essential service should be funded out of general taxation, which the Government has ruled out.

“Notwithstanding this, we are pleased at the progress made through the bill and are broadly supportive of the proposed amendments to it, which should reduce compliance costs,” Mr Grafton told insuranceNEWS.com.au.

Progress on resolving the issue was delayed in 2020 due to the Government’s focus on the pandemic and an election.

The bill says the fire and emergency levy would be charged on insurance for fire damage, rather than contracts for material damage, and makes the sum insured the basis for calculating the levy.

“This change clarifies what value the levy should be calculated from and aligns with terminology used in insurance contracts,” the explanatory note says.

Changes also clarify how the levy applies to motor vehicle insurance, making clear that an annual levy rate will apply to both motor vehicles insured against physical loss or damage and persons insured against third party liability.

The Governance and Administration Committee has called for submissions by October 25.