The Victorian Government’s move to abolish stamp duty on life insurance could result in retail and group policyholders paying more rather than less.

Before dissolution for the impending state election, insuranceNEWS.com.au asked the Treasurer’s office to confirm stamp duty was abolished on July 1. It confirmed that it was.

But the duty has been abolished on death cover only, and not on additional cover such as trauma or disability.  

Holding Redlich partner Jenny Willcocks told insuranceNEWS.com.au it is almost impossible to buy a disability policy as a stand-alone product.

“It is usually attached to a life policy and is not tacked on to cover death,” she said.

“It is an integral part of the life protection package offered and does not involve anything resembling an insurance rider.”

In group life the duty is now applied to all new insured members in a super fund.

Ms Willcocks says previously the duty was paid on the net movement of members.

“If 10 new members took out insurance and five left the fund, the duty was assessed on the premium for five members. This is no longer possible because the duty is levied on all new members who join a policy and who reside in Victoria.”

Retail and group life insurers face complex calculations on how to charge the stamp duty, and Ms Willcocks says some group life insurers are passing on the costs.

For retail policyholders, total premiums could increase because they might pay more for their disability cover than the death component.

Insurers must calculate this on an individual policy basis in Victoria only, because other states retain stamp duty on life insurance.

For group life insurers, the impact of charging all new members joining a policy may be significant if it is predominantly a Victorian fund.

“We have also seen premiums rising dramatically in group life this year, so that has to be factored in,” Ms Willcocks said.

“It is not helping with encouraging people to take out life insurance.”