Dear Editor,
The June issue of Company Director covered the Victorian bushfires issue from several angles, but failed to canvass several of the issues that should be of considerable interest to company directors. That is, the need for risk management at both the commercial and domestic levels; the factors that led individuals and businesses to “self-insure”; and the role of insurance in financing the rebuilding effort.
It has become increasingly obvious since the bushfires that many of the victims took comfort from the Victorian authorities’ “stay or go” policy, under which they were expected to make their own assessment of potential survivability and then stick to it. A more flexible and sophisticated risk assessment by the authorities – and even by individuals – may well have identified the deficiencies in a policy that fell well short in the circumstances of February 7.
NIBA insurance brokers have recently highlighted to their clients the fact that the Victorian and New South Wales governments impose the world’s highest taxes and charges on insurance premiums, making it unaffordable for many small businesses and households.
Insurers say up to 30% of the properties destroyed in the Victorian bushfires weren’t insured. Because owners don’t insure they don’t pay insurance taxes, and therefore don’t pay for the upkeep of the very emergency services they expect to save their properties. And because they have no insurance they’re also the people who are the most reliant on public and government handouts.
Victoria’s only long-term response to the bushfires so far has been to announce a $215.5 million rebuilding of the Country Fire Authority’s equipment and facilities – 75% of which will be funded through the levy on insurance premiums. In regional Victoria, the taxes imposed on property insurance policies (the fire services levy alone is now charged at 68% of the base premium) actually exceed the cost of the premium.
New South Wales recently raised its fire services levy on commercial properties to 40% of the premium, and will also introduce a new $39 million State Emergency Service levy from July 1.
These states maximise their revenue from insurance tax take by adding the cost of the premium and the levies together before calculating GST; they then add up the total to calculate state stamp duty.
It’s a crazy situation, and one that will continue until the Victorian and New South Wales governments follow the example of South Australia, Western Australia and Queensland and fund their emergency services through local government property rates. Under that system every property-owner pays their share in maintaining the fire services, and insurance becomes far more affordable because a large part of the tax burden has been removed.
Insurance exists to provide security to businesses and homes, so that when disaster does strike people can put their lives and livelihoods back together quickly and efficiently.
Risk prevention through proper management and risk transfer through insurance is vital to businesses of every size – every director knows this. I can only suggest that directors should look carefully at the amount of tax their companies are paying on premiums and reflect how that money could be more efficiently used.
If they find the level of tax is excessive (and they will) they could do far worse than spend 10 minutes contacting their local MP to record their disapproval and call for a more equitable system
Yours sincerely,
Noel Pettersen
Chief Executive
National Insurance Brokers Association