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Tax reform would bring ‘$36 billion protection boost’

Abolishing state and territory taxes on insurance would add $36 billion to the nation’s home building and contents protection pool, according to research from the Insurance Council of Australia (ICA).

The analysis shows people in the NT pay the most insurance taxes – $1326 a year per person insured.

Queensland is next at $1182, followed by NSW at $1070.

ICA CEO Rob Whelan says hundreds of thousands of property owners and renters are likely to buy or increase cover if taxes are removed.

“[The research] reinforces the findings of numerous government and independent reports that conclude state taxes on insurance are unfair, inefficient and regressive, and serve as a disincentive for many households to be properly insured.”

Richard Tooth of the Sapere Research Group conducted the analysis of demand for home and contents cover.

The report finds another 242,000 householders would buy contents cover if the cost was not artificially inflated by state taxes – a 10% rise in the number covered.

“The results provide evidence state premium-based taxes have a significant negative effect on take-up of insurance and are directly responsible for many households being without [it],” the report says.

If stamp duties were removed from home building insurance, the value of pre-tax premium held by insurers would rise 13% to $5.52 billion, the research shows.

Another 38,400 householders would take out home building cover – a 22% rise.

Because insurance would be more affordable, households would increase their coverage, ICA says.

Mr Whelan says abolishing inefficient taxes and levies would deliver huge and immediate community benefits.

Only the ACT is acting by phasing out its insurance stamp duties, although Victoria removed its fire services levy on insurance in last year.

The national home and contents insurance pool totalled $2.67 trillion at June 30, ICA says.