The Victorian Government’s announcement of its decision to do nothing about fire service funding reform came on the same day as a report by consultants Trowbridge Deloitte confirmed that state as having the highest levels of tax on property insurance in the world: 78% for businesses in rural Victoria and 55% for businesses in Melbourne. Domestic insurance taxes in Victoria are also the highest in the world: 37% in Melbourne and 44% in the country.

Yet criticism of the Government’s insurance taxes has provoked little public debate, with the Government highlighting allegations that insurers in the state have over-collected up to $47 million in just four years.

The National Insurance Brokers Association, which has led an 18-month national campaign to educate insurance-buyers on insurance taxes, says the Victorian decision to stick with an insurance-based funding system is “disappointing and illogical”. CEO Noel Pettersen said brokers’ small business clients are among those hardest-hit by high insurance taxes at a time when premiums are at “historically high levels”.

Peter Jamvold, the Insurance Council of Australia's (ICA) Group Manager Southern Division, said he was “not aware” how the Treasury made its calculations that established high levels of over-collection. They certainly weren’t relying on industry figures, having rejected offers to assist with the financial modelling of alternative funding systems. “In our submission to the Government we said the system was so clumsy that it led to over-collections in some years and under-collections in others,” he said.

“If insurers were making a windfall from these collections the industry would hardly have been pushing the Victorian Government over the past 20 years to abolish the levy.”

All other States except NSW and Tasmania have changed to property rates-based FSL systems. Mr Jamvold said the ICA’s submission to the Victorian review recommended it should also implement a similar rate-funded system because it was “fairer, more efficient, more transparent and sustainable”.

Anyone wanting to have a say on ways to improve the system in Victoria have until August 21 to make a submission.