Raising awareness over fire levy rate hikes a problem

by Maryvonne Gray 19 Dec 2016

Raising awareness over fire levy rate hikes a problem

The boss of a broker representative body fears the insurance industry will bear the brunt of the blame when predicted massive fire levy rate hikes hit over the next two years.

Gary Young, CEO of the Insurance Brokers Association of New Zealand (IBANZ), said many members of the public would just see that their insurance premium had gone up and be oblivious to the fact that it was the Government effectively taxing them.

“That’s the real problem, they’ll see this increase and think it’s the insurance industry taking more of their money, and if they’ve only got so much to spend, more will end up for this tax and less will end up as cover for the insured,” Young told Insurance Business.

“That’s the whole problem – people don’t understand it’s a government tax, and then there’s another tax on top of it, GST, so there’s a tax on a tax.
“[The question we face is] how do you get the awareness up that this levy is just a tax on people who are acting responsibly and meanwhile the freeloaders get away with still getting the same service but don’t pay for it.”

Young said an increase of 40% was due to hit from 1st July 2017, which in itself was ‘crazy stuff’.

But a year later in 2018 it would potentially get even higher.

“That’s when there’ll be a second wave and potential increase, with the new basis of calculating the levy which is on sum insured rather than on indemnity value.

“We’re opposed to the whole change to the funding. We don’t see why people who are responsible should be funding the fire service and we don’t see why they should be funding the merger of rural and urban fire services.

“A huge part of this increase is due to the merger but that’s a government decision and the government should pay for it.”

Another disparity was around the actual work being done by the Fire Service in the modern age.

“The Government says they’ll pay up to $10 million as a contribution for the non-fire work but the irony is that in the Commission’s report it says that side of it has increased and is now 38% of what the Fire Service does, so medical assistance, helping the police etc, that’s 38% of what they do but the Government is only putting 2% of required funding to cover that sort of thing.

“It’s just not right at all.”

Young said IBANZ had put in a submission on the proposed rate increase but he explained the challenges involved.

“One of the issues is it’s very hard to debate whether the costs they’ve put in are valid or not because there’s no real way of challenging their expenditure.

“It may well be appropriate but there is no way of being able to check that, so essentially people who buy insurance are being asked to pay for something but where’s the overview? Where’s the accountability? There doesn’t seem to be any.”

To rub salt into the wound, the Fire Service Commission wanted the insurance industry to help them do it, but with no financial assistance, Young said.

“We’re just being asked to do it and our clients are just being asked to pay for the whole lot.

“It is frustrating. In the end there’s no real accountability so we can jump up and down as much as we like but if they want to charge they can just force the industry to charge their clients.”

Young said while submissions had closed for the 2017 changes, there was still time to submit on the 2018 changes.

While individual brokers such as Marsh had made their own submissions, brokerages should also encourage their clients to do the same.

“We understand a few clients have put in submissions based on the fact their broker has told them this is what they’re facing next year.

“So there are some people who feel that it’s completely wrong but I don’t know how many.”

He said the Fire Service Commission had approached IBANZ on the subject of making the 2018 submissions but the timing was bad.
“They came to us at the same time as the Kaikoura earthquakes so we had more urgent things to deal with.

“Our role is to help the clients, not to fund the Fire Service, so an earthquake was slightly more important.”

 
Related stories:
Major broker Marsh’s ‘serious concerns’ about fire levy proposals
Broker body shocked by fire levy rate increase proposal
 
1 Comments
  • Kiwislop 19/12/2016 10:22:16 a.m.
    Well perhaps it's time to step it up a notch, Gary. Suggest a headline-grabbing statement will be the first port of call - perhaps "Government secretly robbing kiwis to pay for Fire Service administrators"?

    Submitting to select committees and insurance news sites won't get any real traction.

    My personal preference would be for all NZ insurers to decline/cancel all government business, on the basis that they have breached the good faith arrangement. This would wake them up to the issues, particularly when they go looking for replacement cover offshore for all those Wellington risks.

    Of course that won't happen but a softer option would be invoicing the FSL / GST separately, with a covering note about it being an outrageous taxation that everyone in the industry thinks is entirely unfair. Send it along with a template to write to their local MP about the raging injustice taking place. Real people need to be woken up to the issue - don't just preach to the choir on sites like this.
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