The abolition of the fire services levy (FSL) by the Victorian Government has been given enthusiastic backing by the general insurance industry.

After campaigning for many years, insurers and brokers were surprised but delighted by the decision of Premier John Brumby to abide by the recommendation of the 2009 Bushfires Royal Commission and abolish the FSL.

Insurance Council of Australia (ICA) CEO Rob Whelan says a property-based system will provide “more equitable” funding when it comes into effect on July 1 2012.

“The FSL is an unfair and economically inefficient tax that lacks transparency,” he said. “We congratulate the Government for adopting this important reform.”

National Insurance brokers Association CEO Noel Pettersen says the Victorian Government has accepted what the industry has been saying for years.

“[The FSL] is inequitable because only those people prudent enough to buy insurance contribute to this cost,” he said.

Zurich Australia CEO David Smith told insuranceNEWS.com.au the abolition is a “positive action”.

“For too long insurers have been tax collectors for governments,” he said. “Taxes on insurance are up there along with the so-called ‘sin taxes’ of alcohol, gambling and tobacco.”

Insurance Group Australia (IAG) CEO Mike Wilkins says the reform will help communities recover from catastrophes.

“The funding of emergency services should be more fairly shared by all beneficiaries of those services,” he said.

Suncorp Personal Lines CEO Mark Milliner says NSW and Tasmania must now follow the example of Victoria. “The Victorian Government’s decision to do away with the FSL sends a strong signal to other state governments where similar unfair levies burden households,” he said.

Allianz MD and ICA President Terry Towell says the abolition is “a welcome social equity measure” as the FSL imposed on Victorians the “highest insurance taxes in the world when the cumulative impact of the FSL, GST and stamp duty were taken into account”.

“This combined tax-on-tax-on-tax effect saw Victorian households paying around 50% tax on top of their base insurance premium and many businesses paying up to 100% or more in property insurance tax,” he said.