No plausible rationale say lawyers
by David Elias (InsurancesNewsAustralia.com)
THE VICTORIAN government and its own Royal Commission into the Black Saturday bushfires appear to be on a collision course over the future of the state’s fire services levy.
Counsel assisting has urged the Commission to recommend the abolition of the current insurance-based model which collects $510 million a year from policy holders and to replace it a property-based levy.
It appears likely that the 3 Commissioners led by retired justice Bernard Teague will accept the advice and formally recommend the levy’s abolition in its final report later this year.
It then remains to be seen whether Premier John Brumby will resist the push as seems most likely. A Green paper issued by the state last October strongly favored retention because it was administratively simple and was in the government’s view the most equitable way to collect funds for its fire fighting services.
The submission tabled by the Royal Commission’s own legal team punched holes in the government’s argument.
The lawyers said the current model lacked transparency and there was no plausible rationale for its retention on fairness grounds.
They said the funding of fire services was not shared across the community with at least 75% provided by those who take out property or contents insurance.
They disagreed with the government’s contention that the insurance based fire services levy reflected an allocation of fire related risk made by the insurers.
“There is no requirement that insurance companies charge premiums or impose the levy in this way. Nor is there any suggestion that the policy has been retained on the basis of the government satisfying itself that premiums are in fact risk rated.
“Rather, the policy rationale is an assumption and expectation by government as to how insurance companies behave.”
The submission noted that the levy and associated stamp duties and GST had been described to the HIH Royal Commission as “a tax on a tax on a tax”.
It pointed out that the HIH Royal Commission had recommended the states that had not already done so should abolish the fire services levy on insurers because the cost of providing fire services were born disproportionately by property owners who chose to take out insurance.
Counsel assisting the bushfires Royal Commission said there lacked any definitive evidence the extent to which Victorians were uninsured or under-insured and that the evidence to support an increase in the uptake of insurance if the fire services levy was removed was weak.
“We do not agree, however, with the state government’s view that the lack of reliable data about rates of insurance make it difficult to assess whether criticisms of the current arrangements are significant and whether there are alternative options to deliver sustainable funding services.
“In our view the criticisms have force and the alternatives are demonstrably viable, irrespective of what may be learned at some later date about rates of insurance.”
Counsel recommended that along with a change in the funding model there should be appropriate exemptions and concessions for low and middle income families who would be disadvantaged by the change.
They recommended also that the Insurance Council and the insurance industry improve its communication with consumers about under insurance, including in relation to total cover and extended cover policies and the assessment of rebuilding costs.
They said many insurers had not provided customers with the tools to adequately assess rebuilding costs.