Levies on Fire Services: New Approaches Could Impact Commercial Property Costs
Levies on Fire Services: New Approaches Could Impact Commercial Property Costs
2
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Upcoming modifications to New Zealand's emergency services funding methodology might result in notable levy increases for commercial real estate owners, consequently hiking non-insurance risks, according to industry experts.
According to projections by the Insurance Brokers Association of New Zealand (IBANZ), total levies across commercial properties could see a dramatic rise, potentially doubling under the current consultation proposals.
"Our members are already observing clients either cancel coverage or decrease their coverage level as they attempt to navigate prolonged high inflation and higher insurance premiums," says Mel Gorham, CEO of IBANZ.
"This new approach will likely make premiums less affordable, leading to more instances of underinsurance or decisions to forego insurance altogether," she further added.
The revised framework for the Fire and Emergency New Zealand (FENZ) levy is scheduled to begin on July 1, 2026, but critical decisions regarding its collection methodology are required by December 2023 to give the insurance sector ample time to implement the changes.
The suggested revision includes switching the calculation base for the levy from the current indemnity value method to the sum insured typically used in insurance policies. Presently, the current levy for commercial building insurance is calculated based on indemnity value.
Gorham points out that for older or poorly maintained buildings, the indemnity value can sometimes be as low as 25% of the sum insured, and the proposed model hasn’t thoroughly considered the full impact of this shift.
"We have been highlighting the potential affordability issues if the disparity between sum insured and indemnity value isn't taken into account," she mentioned to insuranceNEWS.com.au.
IBANZ has raised alarms that building value increases could lead to levy spikes by up to 400% by the time the changes are fully implemented in July 2026 if properties are to stay adequately insured.
The consultation document notes that the non-residential property rate would decrease marginally to NZ11.51 cents per $NZ100 insured from NZ11.95 cents. However, Gorham maintains that this reduction falls short of mitigating the comprehensive impacts, which also include expanding the levy to currently exempt assets where FENZ services are less likely to be utilized.
Aircraft
Marine vessels docked at wharves or marinas, or tethered at sea
Crops and livestock situated far from fire stations
Water tanks and retaining walls typically not susceptible to fire damage
It's worth noting that several New Zealand airports maintain their own crash firefighting capabilities funded through landing fees. Levy application to search and rescue helicopters could also increase their insurance costs.
"Search and rescue helicopters often support FENZ with firefighting operations, so the levy might ultimately be passed back to FENZ through the fees charged for their services," IBANZ indicates.
FENZ stated that it will compile the feedback received to aid the Minister of Internal Affairs in making informed recommendations. The consultation paper’s submission period concluded last week.
Published:Monday, 27th May 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
In recent times, Australian insurance companies have come under intense scrutiny due to substantial increases in premiums, even as they report record profits. This trend has raised concerns among consumers and policymakers alike, prompting calls for enhanced transparency and competition within the industry. - read more
Homeowners in Northern Australia are confronting significant increases in insurance premiums, even after the implementation of the federal government's cyclone reinsurance pool aimed at reducing costs in cyclone-prone regions. This development raises questions about the effectiveness of current measures and the ongoing challenges in making insurance affordable for residents in high-risk areas. - read more
Australian consumers are increasingly facing substantial hikes in their insurance premiums, often with little to no explanation from their providers. This lack of transparency has led to growing frustration and calls for greater accountability within the insurance industry. - read more
AIA Australia, a prominent life, health, and wellbeing insurer, has announced strategic partnerships with global fitness company Peloton and premium cycling brand Specialized. These collaborations aim to motivate AIA Vitality members to adopt more active lifestyles by providing significant discounts on cycling equipment. - read more
Bupa, a leading health insurer in Australia, has unveiled plans to significantly enhance mental health services by establishing a network of clinics named Mindplace. This initiative aims to open 60 clinics nationwide by 2027, aligning closely with the government's objective of operating 61 walk-in Medicare Mental Health Centres by mid-2026. - read more
As we dive deeper into the digital era, the topic of cyber security becomes increasingly critical. With businesses and individuals relying heavily on digital technologies, the threat of cyber attacks looms larger than ever. This introductory section aims to unpack the concept of cyber insurance as a tool to mitigate these risks. - read more
Remote work has seen a significant rise in Australia, especially following the COVID-19 pandemic. More businesses are embracing flexibility, allowing employees to work from home or other remote locations. - read more
Cyber risk management involves identifying, assessing, and prioritizing potential risks to an organization's digital assets and implementing measures to mitigate these threats. - read more
In today's digital landscape, Australian small businesses face a myriad of cyber risks that can threaten their operations and financial stability. From sophisticated phishing scams to debilitating hacking attacks, the need to safeguard against such digital threats has never been more pressing. This introductory guide serves to illuminate the complexities of the cyber risk environment within Australia, focusing on the small business sector's unique vulnerabilities. - read more
Cyber insurance is one of the most valuable business covers available today, but it is also one of the most confusing to apply for. Many business owners expect it to work like other insurance types, where you provide basic details such as turnover, industry, and location, then receive a quote. Cyber insurance is different. It behaves less like a simple application and more like a risk interview. - read more
Knowledgebase
Liability Insurance: Insurance that provides protection from claims arising from injuries or damage to other people or property
