Increase to Insurance Premiums-Levies

Geoff from Rototuna North

Insurers cry foul over new levies and taxes hiking house insurance costs

SIMON MAUDE/FAIRFAX NZ
The Fire Service will come to a homeowner's house fire, whether or not they contributed by having insurance.
Major increases in taxes and levies imposed by the Government will hike the cost of house insurance, and risk leading homeowners to abandon, or decrease their coer, the Insurance Council has warned.
The warning comes after a Budget announcement of a 33 per cent rise in Earthquake Commission (EQC) levies from November 1, following fast on the heels of a rise of 40 per cent on the Fire Service levy from July 1.
Both the taxes are collected through levies added to the price of house and contents insurance.
SCOTT HAMMOND/FAIRFAX NZ
New Zealand is ranked only behind Bangladesh and Chile for natural disaster risk.
"This means people with house and contents insurance will be levied and taxed over $450 without even counting the 15 per cent GST applied to the premium that the insurer charges," Insurance Council chief executive Tim Grafton said.
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The council wants both levies scrapped, and the EQC and Fire Service funded from general taxation..
Insurance Council chief executive Tim Grafton says the government is making house insurance artificially expensive.
Making house and contents insurance expensive through levies and taxation risked creating a "moral hazard", Grafton said.
People who decided they could not afford insurance, or who decided to cut it by decreasing the sum their house was insured for, or who opted for a much higher excess, could end up appealing for help after a natural disaster.
That would put the government of the day under extreme moral pressure, Grafton said.
"By the end of this year households will see the levies and taxes on people who insure themselves sky rocket. From July 1 there will be a 40 per cent increase in the levy used to fund the fire service which everyone benefits from, not just the insured," Grafton said.
New Zealand was one of the most vulnerable countries in the world to natural disasters for its size, he said.
"This election year there is an opportunity for political leadership to be shown.
"Does New Zealand continue to go down the path of making it increasingly difficult for low income people to protect themselves, or should we really be addressing our vulnerability?" Grafton said.
"If fewer people insure that will not only put upward pressure on the cost of insurance and so create a downward spiral, but it will also create a moral hazard for the Government.
"Does it help the uninsured and thereby encourage greater levels of non-insurance and under-insurance?
"General taxation should fund the Fire Service which benefits everyone, insured and un-insured alike. The Crown balance sheet is now strong and can bear the $1.75 billion exposure that the EQC levy seeks to fund," Grafton said.