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Bushfires Commission recommends scrapping of fire services levy

The insurance industry is pushing for the Victorian Government to adopt the recommended scrapping of the controversial Fire Services Levy, but its calls have so far fallen on deaf ears.

By Nina Hendy

More than 60 insurance companies told the Victorian Bushfires Royal Commission that the fire services levy should be replaced with a more equitable system in light of the devastating 2009 Victorian bushfires. The industry argued that the current system unfairly penalises home owners prudent enough to take out voluntary insurance.

The Commission agreed, with one of its more controversial recommendations asking that the Victorian Government replace the fire services levy with a property-based levy and introduce concessions for low income earners.

The recommendation was handed down at the start of this month after an 18 month enquiry into the catastrophic February 7 fires that killed 173 people. Both the Insurance Council of Australia and NIBA want the Victorian Government to implement the recommendations swiftly.

Noel Pettersen, CEO, NIBA says the lack of equity and transparency in the current arrangements constitutes a good reason for moving to another system.

“It is inequitable because only those prudent enough to buy insurance contribute to the cost. Those who aren’t insured or who (in the case of some businesses), insure offshore or who own vacant land (where fires often start) do not contribute. There is evidence that the inflated cost of insurance contributed to the high levels of under and non-insurance,” Pettersen says.

“Both sides of politics should take a responsible position by championing this tax reform and ensuring secure and equitable funding for the fire services into the future.”

Whether the recommendation will be adopted is yet to be seen. State Opposition leader Ted Baillieu has already pledged to implement the recommendations if elected, but State leader John Brumby has so far only committed to further consultation on the issue, pending the outcome of his government’s own inquiry into the levy.

The Bushfire Reconstruction and Recovery Authority estimated that 25 per cent of those affected by the 2009 Victorian fires were not insured, and of those who were, as many as 80 per cent were under-insured.