The insurance industry has labelled as “disappointing” Victorian Government predictions of increased revenue from insurance taxes announced in the state's Budget yesterday.

Insurance Council of Australia (ICA) CEO Andrew Hall says the planned increase has “tempered” the state’s plans to set aside $517 million to fund several bushfire risk reduction projects.

“Insurers have been calling for some time for this scale of investment in resilience and mitigation measures, and it’s pleasing to see the Victorian Government has heard those calls,” Mr Hall said in a statement today.

“However, the effectiveness of this welcome Budget measure is tempered by [Treasurer Tim Pallas’s] own projections that stamp duty on insurance will rise by 29% over the forward estimates to almost $2 billion.”

He says stamp duty on insurance is a “retrograde revenue measure” that numerous inquiries and reviews have found leads to household underinsurance or non-insurance.

“It’s disappointing that not only does this Budget fail to reform this problem, in fact the Budget papers show an increasing reliance on insurance stamp duty,” Mr Hall said.

“The ICA urges all state and territory governments to advance tax reform and remove stamp duty on insurance products to increase insurance affordability for all Australians.”

Under the predictions, insurance tax revenue is expected to increase by 7.2% to $1.6 billion in the next financial year.

Most insurance tax revenues are expected to increase, except the revenue from travel insurance due to COVID-19 restrictions barring residents from going abroad except in certain situations.

The Budget paper says insurance taxe revenues are expected to increase by an average annual rate of 6.4% over the forward estimates up to 2024/25.

It estimates insurance taxe revenues of about $1.73 billion in 2022/23, with further increases to $1.84 billion and $1.96 billion respectively in the next two financial years.

The paper says the $517 million funding for bushfire risk reduction programs will protect communities vulnerable to the impact of extreme weather and natural disasters.

It says the 2019/20 bushfire catastrophe led to significant loss and damage to homes, farms, properties, community assets, roads and other infrastructure in affected regions such as East Gippsland and north-east Victoria.

The Government has agreed to demolish, remove and safely dispose of all applicable buildings destroyed or damaged beyond repair, regardless of insurance arrangements and is contributing towards the cost of the clean-up.