Insurers warn of levy risks

Major increases in taxes and levies imposed by the Government will hike the cost of house insurance, leading to the risk that homeowners will abandon or decrease their cover, 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.

‘‘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.

The council wants both levies scrapped, and the EQC and Fire Service funded from general taxation.

People who decided they could not afford insurance could end up appealing for help after a natural disaster, Grafton said.

That would put the Government of the day under extreme moral pressure.

‘‘By the end of this year households will see the levies and taxes on people who insure themselves skyrocket. 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.’’

New Zealand was one of the most vulnerable countries in the world to natural disasters for its size, Grafton said.

‘‘The Crown balance sheet is now strong and can bear the $1.75 billion exposure that the EQC levy seeks to fund.’’