Insurance costs set to rise

By ANDREW LAXON

Home and car insurance premiums are likely to rise through an increase in the Fire Service levy this year.

Internal Affairs officials have told the Government that it may have to put up the levy by June to pay for a $17 million surge in Fire Service Commission debt.

The department has also recommended a full review, which could lead to the Fire Service being funded from household rates rather than insurance premiums.

Fire Service levies have see-sawed dramatically over the last two years because of fierce political arguments and financial crises involving the commission and its former chairman, Roger Estall.

Under Mr Estall the levy dropped from 6.2c to 4.5c per $100 of insured value in 1998 but it was suddenly restored to its old level by National last October.

The department's briefing paper warns the Government that this increase, due to take effect from next month, may not be enough.

It says the commission's "large and growing level of debt" is projected to rise from $78.7 million in June to $95 million in two years and the commission has no plan to pay it back.

Capital spending has almost trebled in the last five years from $10.8 million to $30.9 million, with no explanation of whether the increase is justified.

The briefing says the commission's financial problems stemmed from the 1998 decision to drop the levy rate, as well as the Government's withdrawal of $12.5 million of taxpayer funding and the commission's failure to save $11 million through restructuring plans, which firefighters successfully opposed in court.

Last year an Auditor-General's report found the commission's financial control systems had been inadequate since December 1997.

The chief executive of Internal Affairs, Dr Roger Blakeley, who is a member of the commission, admitted to a select committee that it was the worst rating he had seen for a crown entity.

In the briefing paper, the department also recommends a complete review of the Fire Service to tackle longstanding problems over funding and efficiency.

It says using insurance premiums to pay for the service is seen as unfair because people who do not insure their properties are "free riders."

Using household rates could be seen as fairer and could overcome earlier problems of high administration costs for a property-based collection scheme.

The briefing notes that the Insurance Council has argued that many companies are under-insuring their properties to avoid paying the full levy.

The Minister of Internal Affairs, Mark Burton, said his first priority was to bring an end to the long-running industrial dispute between the commission and the Professional Firefighters Union.

However he believed the Government needed to address issues such as Fire Service funding and it would consider the proposal to use household rates instead of insurance premiums.