Insurance change sought

ROB STOCK
Last updated 14:00 13/01/2013
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JOHN SELKIRK/FairfaxNZ
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The insurance industry has asked the Government to reduce the cost on households of funding the Fire Service by ending the Fire Service levy on insurance premiums.

The Government has been forced into a review of the funding of the Fire Service as a result of impending funding deficits.

The deficits were in part caused by levy-minimisation schemes promoted to large businesses by insurance brokers.

The results of the review are expected to be released in the early months of this year.

A fair and stable funding mechanism could be achieved only by ending the decades-old practice of collecting the levy from house and car insurance, said Tim Grafton, chief executive of the Insurance Council, the peak body for the general insurance industry.

Under that mechanism, only those who had insurance paid, despite continuing to rely on the Fire Service, and those who under-insured or partially self-insured, as some businesses do, can get away with paying less than is fair, Grafton said.

That included some government departments.

The Insurance Council has told the review that a levy on property rates and car registrations should be the favoured option, because it would result in every property owner and car owner making a contribution.

The second favoured option and the "best practice" overseas is to fund the Fire Service - an essential national good - from general taxation, although raising direct taxes is not something that National governments tend to favour.

"Our view is that the Fire Service levy is inequitable because it means that those people who do not insure or who under-insure their property avoid making a fair contribution," Grafton said.

"States in Australia have been shifting away from this model because they think it is unfair."

Only by using one of the two mechanisms it has proposed to the review can everyone be made to share the cost fairly, with responsible insured households paying less, and the under and uninsured paying more.

Grafton is not particularly confident the insurers' voice will carry weight, as the messages coming out of Government appear to be to continue to collect the levy on premiums.

Minister of Internal Affairs Chris Tremain has said that the aim will be to create a funding mechanism that is stable and equitable, but Grafton asks how that can be achieved using the levy on insurance model unless everyone is forced to fully insure.

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- Sunday Star Times

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