The Insurance Council of New Zealand is concerned that major increases in taxes and levies on people who insure their homes could see low income households not be able to protect themselves from disasters.

Chief executive Tim Grafton says by the end of this year, households will see the levies and taxes on people who insure themselves 'sky rocket”.

'From 1 July 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. From November 1 there will be a 33 per cent increase in the EQC levy applied to house insurance.”

Both of these levies then have 15 per cent GST applied to them.

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, adds Tim.

New Zealand is one of the most vulnerable countries in the world to natural disasters for its size, says Tim, and insurance is vital in providing protection for people as we have seen with the industry likely to pay $25 billion for the Canterbury and Kaikoura earthquakes.

He says 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?

'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?”

Tim believes general taxation should fund the NZ Fire Service which benefits everyone, insured and un-insured alike. The Crown balance sheet is also currently strong and can bear the $1.75 billion exposure the EQC levy seeks to fund.

'Crown risks to the likes of foot and mouth disease and pandemics are not specifically funded. The challenge to future governments is to think how we can keep people protected from natural disasters.

'All the evidence points to insurance as critical to economic and social recovery post-disaster.”

Research commissioned by the ICNZ shows only 25 per cent of New Zealanders agree that New Zealand is well prepared to minimise the economic and social costs of natural disasters.