Rises in fire levy rates rile industry
A dramatic increase in the fire services levy (FSL) in Victoria and NSW has met with anger from the insurance industry.
New data obtained by insuranceNEWS.com.au last week shows NSW, which will introduce a new State Emergency Services levy on premiums from July 1, has also raised its fire services levy on commercial premiums from 36% to 40%, and for householders from 19% to 22%.
In Victoria, it’s become clear the $215.5 million boost for the state’s emergency services is to be primarily paid for by insurance-buyers.
The Victorian FSL now accounts for 68% of the premium for businesses in country Victoria, up from 63%. In metropolitan areas the levy on commercial premiums is now 51%, up from 48%.
For householders the figure is now 26% (up from 24%) in country Victoria, and 21% (up from 20%) in urban centres.
The states cumulatively add the totals of the insurance premium, FSL, GST and then state stamp duty to maximise the amount they take – thus consolidating their status as the world’s biggest taxers on insurance.
FSL rates are unchanged in Tasmania where the rate is 28%. The levy no longer exists in Queensland, Western Australia and South Australia where funding for fire services comes from local council rates, while in the ACT and Northern Territory it comes from consolidated revenue.
The rises in the levy have been met with anger from insurance leaders and organisations.
National Insurance Brokers Association (NIBA) CEO Noel Pettersen says the figures “add more weight” to NIBA’s public awareness campaign on insurance taxes. The association is distributing a discussion paper on insurance taxes through broker members in NSW and Victoria.
The issue will also be addressed in a submission NIBA is preparing for the Victorian Bushfires Royal Commission. The Insurance Council of Australia, which has been given permission to appear at the royal commission, is expected to also highlight the impact of high insurance taxes as a disincentive to insure.
CGU CEO Duncan West told insuranceNEWS.com.au the further increase in the FSL adds to an already significant burden.
“The current funding system lacks transparency, equity and simplicity,” he said. “It doesn’t make sense that people who choose not to insure don’t contribute to funding of essential fire-fighting services that benefit the whole community.”
Mr West says CGU has consistently called for changes to the funding model to spread the cost more fairly, such as the property-based systems successfully adopted in other states.
“Moving to a property-based system has the added benefit of reducing the cost of insurance, which we believe will encourage households and businesses to insure more prudently and help deal with the issues of non-insurance and underinsurance,” he said.
Zurich CEO David Smith says Australia suffers from chronic underinsurance, largely due to the affordability of insurance.
“Australia, and in particular Victoria and NSW, has the highest taxes on insurance premiums in the world,” he said. “Governments should be working with the insurance industry to reduce these taxes to encourage people to be adequately covered.”
Also see ANALYSIS
New data obtained by insuranceNEWS.com.au last week shows NSW, which will introduce a new State Emergency Services levy on premiums from July 1, has also raised its fire services levy on commercial premiums from 36% to 40%, and for householders from 19% to 22%.
In Victoria, it’s become clear the $215.5 million boost for the state’s emergency services is to be primarily paid for by insurance-buyers.
The Victorian FSL now accounts for 68% of the premium for businesses in country Victoria, up from 63%. In metropolitan areas the levy on commercial premiums is now 51%, up from 48%.
For householders the figure is now 26% (up from 24%) in country Victoria, and 21% (up from 20%) in urban centres.
The states cumulatively add the totals of the insurance premium, FSL, GST and then state stamp duty to maximise the amount they take – thus consolidating their status as the world’s biggest taxers on insurance.
FSL rates are unchanged in Tasmania where the rate is 28%. The levy no longer exists in Queensland, Western Australia and South Australia where funding for fire services comes from local council rates, while in the ACT and Northern Territory it comes from consolidated revenue.
The rises in the levy have been met with anger from insurance leaders and organisations.
National Insurance Brokers Association (NIBA) CEO Noel Pettersen says the figures “add more weight” to NIBA’s public awareness campaign on insurance taxes. The association is distributing a discussion paper on insurance taxes through broker members in NSW and Victoria.
The issue will also be addressed in a submission NIBA is preparing for the Victorian Bushfires Royal Commission. The Insurance Council of Australia, which has been given permission to appear at the royal commission, is expected to also highlight the impact of high insurance taxes as a disincentive to insure.
CGU CEO Duncan West told insuranceNEWS.com.au the further increase in the FSL adds to an already significant burden.
“The current funding system lacks transparency, equity and simplicity,” he said. “It doesn’t make sense that people who choose not to insure don’t contribute to funding of essential fire-fighting services that benefit the whole community.”
Mr West says CGU has consistently called for changes to the funding model to spread the cost more fairly, such as the property-based systems successfully adopted in other states.
“Moving to a property-based system has the added benefit of reducing the cost of insurance, which we believe will encourage households and businesses to insure more prudently and help deal with the issues of non-insurance and underinsurance,” he said.
Zurich CEO David Smith says Australia suffers from chronic underinsurance, largely due to the affordability of insurance.
“Australia, and in particular Victoria and NSW, has the highest taxes on insurance premiums in the world,” he said. “Governments should be working with the insurance industry to reduce these taxes to encourage people to be adequately covered.”
Also see ANALYSIS