A review of NSW state funding has resurrected industry hopes for the abolition of inefficient insurance taxes.

The NSW Review of Federal Financial Relations has published a discussion document which highlights the state’s reliance on “taxes that have relatively high economic and social costs and dampen productivity”.

The report acknowledges that “insurance based taxes are commonly considered to be one of the more costly taxes to society. By adding to the price of insurance, they can result in underinsurance and non-insurance.”

Insurance Council of Australia (ICA) spokesman Campbell Fuller says ICA is “encouraged that substantive tax reform is now on the agenda” but adds that “any reform of stamp duties will require action by all state and territory governments”, excluding ACT which abolished them in 2016.

“At present consumers in most states pay 19-21% tax on insurance products, which is a disincentive to making sure they are properly covered or insured at all,” he told insuranceNEWS.com.au.

“The most pressing need for tax reform is in NSW where taxes and the Emergency Services Levy combined result in consumers paying more than 50% and small businesses paying up to 70% tax on their general insurance.

“It’s no coincidence NSW also has the highest rate of non-insurance in Australia.”

Mr Fuller also says the Australian Prudential Regulation Authority highlighted recently that tax reform is “one of the most effective ways” to reduce insurance premiums in parts of the country exposed to natural catastrophes.

Click here to see the NSW discussion document.