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.
The National Truck Accident Research Centre (NTARC) has released its 2025 Major Incident Investigation Report, shedding light on the primary human factors contributing to significant truck crashes across Australia. The findings emphasise the critical roles of inattention, distraction, and inappropriate speed in these incidents, underscoring the necessity for targeted safety interventions within the transport industry. - read more
QBE Australia Pacific has recently entered into a strategic partnership with Sure Insurance, aiming to bolster its broker-distributed householders cover. This collaboration signifies a concerted effort to provide more comprehensive and accessible home insurance solutions tailored to the diverse needs of Australian homeowners. - read more
Underwriting agency Blue Zebra has recently announced the establishment of new capacity arrangements for its home building and contents, landlord, and small to medium-sized enterprise (SME) package products. This strategic move is set to enhance the agency's ability to offer comprehensive and competitive insurance solutions tailored to the evolving needs of Australian homeowners and business operators. - read more
The Insurance Code Governance Committee has imposed a $30,000 penalty on AIG Australia for breaching its obligations related to claims handling. The insurer failed to inform customers about delays in processing their claims and neglected to advise them of their right to escalate complaints to the ombudsman. This regulatory action underscores the critical importance of transparency and communication in the insurance claims process. - read more
Insurance Australia Group (IAG), a leading insurer in Australia, has highlighted the significant impact of climate change on the cost of home insurance. The company reports that the increasing frequency and severity of weather events are contributing to rising premiums for homeowners. - 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
Cyber insurance, also known as cyber liability insurance, is a type of coverage designed to protect businesses from the financial repercussions of cyber attacks and data breaches. As cyber threats become more sophisticated, the need for a safety net to mitigate the impact of such incidents has grown significantly. - read more
Cyber Insurance is a type of insurance policy that protects businesses against internet-based risks and threats. This policy covers damages and losses caused by cyber attacks, such as theft of customer information, network downtime, and damage to reputation. - read more
In an age where digital presence intertwines with daily operations, the threat landscape in Australia has magnified, exposing businesses to an evolving array of cyber threats. From sophisticated phishing attempts to ransomware attacks, the risk of digital insecurity looms large. Australia, with its growing technological adoption, finds itself facing an upsurge in cyber threat incidents year over year. - read more
Knowledgebase
Claim: A formal request made by the policyholder to the insurance company for payment of a loss covered by the insurance policy.
