Stamp duty reforms must be undertaken as part of measures to improve affordability and resilience, Insurance Council of Australia (ICA) CEO Andrew Hall has told the National Press Club in Canberra. 

“For a long time, insurance has been seen as a taxation cash cow, little different than alcohol and cigarettes,” he said in a luncheon address. 

“But insurance isn’t a cigarette or a vaping product that harms your health; nor is it an alcoholic beverage where tax and price can moderate and temper excessive behaviour. Nor is it a one-off purchase like a home.” 

Mr Hall welcomed the NSW Government’s announced plan to abolish the Emergency Services Levy on insurance but said, with the exception of the ACT, insurance customers continue to pay state stamp duties of around 10%, plus the goods and services tax. 

The Federal Government is the insurer of last resort for the states and there’s an opportunity to think about how to incentivise states to lower their insurance taxes to ensure more people have cover, he said in a speech titled “The protection gap and what it means for Australia”. 

“It’s not our Australian ethos that only wealthy Australians can be protected from catastrophic loss but the rest of the community must take its chances,” he said. 

Mr Hall says, apart from ending the taxes, reforms could include directing funds raised to mitigation. Queensland, for example has enjoyed windfall revenue gains as a result of the duty on surging premiums, and is particularly exposed to natural disasters. 

The industry is not seeing the funds collected from insurance used around Australia for mitigation spending to reduce risk, while mitigation infrastructure is a high priority. 

“We see the money just disappear into general revenue,” he said. “We are seeing the challenges happening in the infrastructure portfolio at the moment, but this is key infrastructure for where people live and how they are protected.” 

Mr Hall told the press club that California, which is similar to Australia in having a rising population and increasing development in catastrophe-prone areas, has provided an example of what not to do, with major insurers withdrawing from property cover that market. 

“They have very heavily tried to regulate the problems with insurance through laws, and I would say that at the end of that experiment we are seeing a disaster in insurance coverage,” he said. “We don’t want to make the mistakes that have been made in places like the United States.” 

Mr Hall welcomed the current Government’s commitment to the $1 billion Disaster Ready Fund and the Hazards insurance Partnership, that aims to improve data and information sharing, but recent meetings with reinsurers highlight that more needs to be done. 

Expectations on potential savings from the Cyclone Reinsurance Pool had been inflated after its launch by the previous Federal Government, but while some high-risk properties in exposed areas will get big reductions, across the board savings are likely to be relatively minor, he said. 

“It is an important scheme. We need to see how it works, how it plays out, but sometimes these pools don’t deliver all that they are promised to,” he said.