The Victorian Government’s fire services levy (FSL) on rural and regional property insurance has risen 30%, with country brokers warning the rise comes on top of significant increases in farm and home premiums.

The Liberal-National Party coalition government has also imposed a 12-month extension to the FSL, which had been due to be phased out by July next year.

Brokers have warned of rises in the number of uninsured and underinsured regional properties as people abandon unaffordable insurance.

Farmers are expected to be hit hardest by the additional tax levels, which equates to a 123% increase once stamp duty and GST is applied.

The levy is imposed on the base premium, with the state adding GST and then stamp duty tax on top. This will see a typical $1000 premium for insuring a retail business jump to about $2238.

The 2009 Victorian Bushfires Royal Commission called for the removal of the FSL, and the State Government had agreed to adhere to a July 2012 timetable. However, the Government has now decided to delay the transfer to a property-based system by at least a year.

A Government spokesman did not return calls from insuranceNEWS.com.au for additional information.

LMI Group MD Allan Manning, a long-time campaigner for the removal of the levy, says this increase in a tax that is already earmarked for abolition “can’t be justified”.

“It’s been a terrible year for insurance and I don’t see how they can justify this disincentive to insure, especially as the rise is far higher than on any other commodity that people buy,” he told insuranceNEWS.com.au.

National Insurance Brokers Association (NIBA) CEO Dallas Booth says the increase is “grossly unfair” to policyholders, especially as it only applies to people who take out insurance.

“It’s unfortunate this burden of increased funding is being applied prior to the removal of levies and is a real concern to NIBA that the community problem of underinsurance may well be exacerbated as a result of this,” Mr Booth told insuranceNEWS.com.au.

Insurance Council of Australia GM Risk and Disaster Planning Karl Sullivan says the FSL rises come as a direct result of the industry’s compulsory “contribution” to the Country Fire Authority (CFA) increasing by 34.6% from $309 million in 2010/11 to $416 million this financial year.

He says the CFA budget has been increased to help fund the royal commission’s recommendations, including fireproof community shelters.

Victorian Farmers’ Federation Farm Business and Regional Development Committee Chairman Peter Tuohey says some farmers will no longer be able to afford to take out full cover.

“We just hope the message is getting through to the Government on how important it is to get it right and make sure everybody is paying the levy in the future,” he said.

Ballarat-based broker Neville Marshall, of Lillingston & Marshall Insurance Brokers, says home and farm premiums have already gone up more than 25% this year.

“It’s mind-boggling why the Government needs all this extra money,” he said. “This will have a huge impact on rural communities.

“A lot of farmers are volunteer firefighters who are out there protecting others’ homes and not getting paid for it and then they still get slugged with this,” he said. “It’s just not on.”

Dr Manning says the decision to defer the phase-out of the FSL in Victoria “means the insurance industry will carry the burden another two fire seasons”.

Mr Booth says NIBA will raise the issue with the Victorian Treasury tomorrow when they meet to discuss the phase-out process.

“Good consultation is occurring in relation to the process,” he said. “It’s just unfortunate that the cost of additional measures provided by the CFA are being raised prior to the phase-out. The burden it creates on policyholders is very significant and unfair.”