Insurance taxes should be slashed: NIBA
Financial Standard, 3 March 2009
The average household in Victoria pays as much as 50 per cent more in house and contents cover due to government-related insurance taxes, prompting an insurance industry body to call for tax reforms ahead of the bushfire royal commission.
The National Insurance Brokers Association (NIBA) has called for the New South Wales and Victorian government to review insurance premium taxes so more Australians can afford basic insurance like home and contents cover.
NIBA's announcement came following estimates by insurers that as many as one-third of the houses destroyed in the Victorian bushfires were not insured.
"Insurance must be affordable to be effective, yet state government taxes place a simple product like home and contents cover into the ‘too expensive' basket for many people," said Noel Pettersen, NIBA's chief executive.
Pettersen said the Victorian and New South Wales governments collect 75 per cent of the budget for their fire services from insurance premiums.
On top of high insurance premiums, the total cost for someone requesting insurance includes GST, the fire services levy and state stamp duty.
"It's a process designed to extract the maximum possible in taxes and adds a significant amount - up to 50 per cent in the case of regional Victorian householders - to the total bill," said Pettersen.
The problem is that premiums are set to increase further from July this year after the NSW Government changes the State Emergency Service levy, which then increases the NSW stamp duty.
"Insurance isn't a sin. They shouldn't be able to tax insurance at the same rate they do alcohol, or tobacco or gambling," said Pettersen.
"The Victorian bushfires have made it very clear just how bad the situation has become, and affordability is a major factor."
He added that the two governments shouldn't wait for the bushfire royal commission to examine the insurance taxes issue.
"There's abundant evidence from other states which have transferred the cost of fire services on to other sources like property rates," he said, continuing, "Insurance becomes much more affordable for ordinary Australians if it's free of the fire services levy."