One for the ordinary Australian
Insurance & Risk Professional, April 2009
NIBA urges the community to learn more about insurance taxes and demand reform.
NIBA has launched a campaign to educate ordinary Australians on state insurance taxes. A paper examining the background and the effects of insurance taxes are being distributed to brokers in Victoria and New South Wales to pass on to their clients. Brokers across Australia will also receive copies once the demand in the two “hot spot” states is met.
Copies of the NIBA paper “What you need to know about taxes on insurance” are also being distributed to journalists as well as community and business leaders.
NIBA Chief Executive Noel Pettersen says the tax campaign is being launched in NSW and Victoria because the two states use fire services levies that make insurance unaffordable for many Australians and unfairly expensive to all.
A few months ago NSW introduced a further levy on premiums, this time to fund the State Emergency Service. But Mr Pettersen says the February bushfires and the controversy at the number of uninsured victims have brought the issue into sharp relief with the community.
“We’ve been fobbed off for years by state governments when we’ve spoken about this issue,” he said. “But now people are asking why tax is being imposed at levels similar to tobacco and alcohol.”
He says the NIBA paper explains how the taxes work and the much fairer funding alternatives. It also looks at real brokers’ clients and shows how their insurance is calculated.
“We figure the only way we are going to change the insurance tax situation is by getting the community to demand change,” he told Insurance & Risk Professional.
“Governments will continue to ignore the industry as long as they can collect revenue.”
The issue will also be raised when the royal commission investigating the fires looks into how much affordability was a factor in people’s decision not to insure.
In Victoria, the fire services levy attracted considerable debate on talkback radio, on television news programs and in newspapers. Special attention has been paid by regional media, whose business advertisers pay substantially more for their insurance than city companies.
For example, a small business in country Victoria with a base premium of $100 will pay an extra $97.23 in taxes – made up of 63% fire services levy, 10% goods and services tax (GST) and 10% stamp duty on top of the full amount.
Mr Pettersen says despite the huge taxes paid by policyholders, people generally don’t tend to react to taxes on insurance as they would if, for example, the Federal Government tried to raise the GST.
“It’s always been below the community’s radar, so all we can do is try to educate consumers to take up this fight on their own behalf”, he said. “After all, it’s the community that’s paying taxes they shouldn’t have to.”
By encouraging people to protect their property through insurance, NIBA says governments would minimise the cost that accrues to the state when a large-scale disaster strikes, such as in the Victorian bushfires.
In the past few years, a royal commission, two state government reviews and a number of commissioned studies have recommended insurance taxes be reduced or removed and the fire services levy be replaced with a levy on council rates.
In the financial year 2006/07 state governments raised $3.71 billion from taxes on insurance premiums, including $854 million in fire services levy.
Steadily rising personal lines and property premiums will further increase the tax take for governments this year.
“It’s been obvious for a long time that we need reform, but reform won’t come until the community demands change. All we can really do is keep the issue alive and help people understand how counter-productive these taxes are.”