Insurers and brokers have welcomed a New Zealand government review of the fire and emergency services levy on insurance.

Internal Affairs Minister Brooke van Velden today announced an investigation into “better ways” to fund Fire and Emergency New Zealand.

The levy was introduced in 1975 and Ms van Velden says FENZ’s remit has widened since then. Some 95% of its income is collected through levies on property insurance.

“Given the widened mandate, there is a valid question about whether this model is fair for levy payers and fit for purpose,” she said.

The Department of Internal Affairs will engage with stakeholders, considering problems with the current system and alternative approaches, taking into account feasibility of implementation.

The Insurance Council of New Zealand has welcomed the move, saying insurers have “long questioned” whether the levy remains appropriate. ICNZ recently proposed an alternative community protection levy.

“The review provides an opportunity to step back and take a considered look at how best to fund a vital public service, while easing pressure on insurance premiums over time,” CEO Kris Faafoi said.

The Insurance Brokers Association of New Zealand says in the nine months to March this year, only 59% of incidents FENZ responded to were fire-related, including false alarms.

CEO Katherine Wilson says policyholders end up paying for services that all members of the public receive, regardless of whether they are insured.

IBANZ believes the levy should be removed from insurance and instead be collected via either central government taxation or council rates.

“Access to FENZ services is quite rightly available to all New Zealanders, but those who pay insurance premiums are unfairly burdened with funding them,” Ms Wilson said.

IBANZ says the sums involved are significant.

“FENZ levy payments amounted to nearly $NZ800 million ($659.44 million) in 2024-25 and given insurance brokers place around half of all insurance in New Zealand, they are the unpaid administrators of the levy – calculating, collecting and handing over large sums of money to FENZ on behalf of the government.

“The system is complex for brokers and consumers alike. Brokers have to interpret complex rules to calculate the proportion of levy payable, leading to administrative load, potential misinterpretation, inconsistency and friction for both brokers and clients.”

The government says the review will not affect recently announced levy rates, which have been set for the next three years starting on July 1.

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