The Insurance Council wants the Government to replace the fire service levy on insurance policies, saying the system is outdated and pushes up the cost of cover.
The Insurance Council of New Zealand (ICNZ) made the call on 16 September, in a submission to the Government's review of how Fire and Emergency New Zealand (FENZ) is funded. It says emergency services shouldn't be paid for mainly through levies on insurance policies.
ICNZ says government taxes and levies make up around 40% of a typical home insurance premium. The FENZ levy accounts for about 5%.
Across all the insurance products that carry the levy, it's approximately 9% of premiums.
ICNZ chief executive Kris Faafoi said the current system is a hangover from an earlier era.
"The current funding system reflects a time when fire services were closely linked to fire insurance, but that's no longer the reality," he said.
"FENZ today responds to a wide range of emergencies including vehicle accidents, medical events and civil defence emergencies. Everyone benefits from having a strong and effective emergency service," Faafoi said.
ICNZ also says collecting and administering the levy puts significant compliance costs on insurers, and those costs are ultimately passed on to consumers.
Its recommendation is that FENZ be funded through general taxation or property and vehicle-based levies, reflecting the public good nature of the services it provides.
The submission points out that most Australian states and many comparable overseas places have moved away from insurance-based fire service levies. They now use general taxation, local government funding or property-based levies instead.
Faafoi said the present approach is unfair in two ways.
"The current approach is inequitable because people with similar assets can pay very different levy amounts depending on the insurance cover they choose, while those who are uninsured contribute nothing towards funding the service," he said.
He said ICNZ strongly supports a well-funded FENZ, and the issue is whether the current model funds it sustainably and fairly.
"Insured households and businesses bear most of the cost through the levy, despite the benefits of FENZ being shared across the community. That is becoming increasingly difficult to justify," Faafoi said.
"We believe the time has come to move beyond an insurance-based levy and adopt a funding model that shares the cost of emergency services more fairly across the community."
