The Victorian Government has passed the Emergency Services Bill, which will slug self-insured businesses millions more in taxes each year. The bill sailed through the state’s Legislative Assembly on Thursday night despite protests from insurers and business that there has been no consultation and the bill reveals a total ignorance of how insurance works.

Victorians are already the highest taxed policyholders in the world, paying up to 82.5% on their base premiums for property insurance.

This new tax – the Government insists it isn’t a tax but every expert we have spoken to maintains it is – will require brokers and insurers to come up with a fire services levy (FSL) calculation for the self-insured portion of any property insurance. It’s based around a  “notional premium” for companies that have deductibles of $10,000 or more in their property insurance policies. 

The Insurance Council of Australia (ICA) says it’s a particularly confusing move for a Government that is spending a lot of its time trying to entice new businesses to the state.

According to The Age newspaper, more than 45,000 jobs and 100 companies have moved offshore or interstate since the Bracks Government came to office in 1999. This new impost is unlikely to help reverse the trend.

The largest companies are expected to be hit hardest, with global packaging group Amcor saying Victoria has the highest premium taxes of any of the 29 countries in which it operates.

ICA Group Manager Southern Division Peter Jamvold says some of Victoria’s biggest companies will pay up to $1 million more in taxes. While critics have labelled the legislative move as cynical, attention will now switch to NSW, which may be tempted to follow the same path.

In a strongly worded letter to Victorian Premier Steve Bracks, NIBA CEO Noel Pettersen says the issue of escalating state insurance taxes can’t be allowed to go unnoticed any longer.

He says the legislation was “introduced by stealth, without the opportunity of proper and considered consultation” and is detrimental to businesses operating in Victoria.

“Why did the Government avoid consulting with those insurance-buyers who have now been directly disadvantaged by this flawed legislation?” he asked Mr Bracks. “Your Government should be supporting business, not gouging every cent they can from those prudent enough to take out insurance protection.”

Unlike premiums, there is no agreed value or commercial values applicable to deductibles and there is no method for calculation that would apply to deductibles.

Mr Jamvold says the lack of consultation shows a very poor understanding of insurance practice. “The provisions are unworkable.”

He says the Government doesn’t understand that while deductibles are an essential insurance mechanism, they are not insurance per se because there is no transfer of risk.

Policyholders in Victoria contribute 75% of the Metropolitan Fire Brigade’s annual budget ($176.3 million out of $235 million) and 77.5% of the Country Fire Authority’s budget ($158 million out of $204 million). The best way to dodge payment is easy and legal: just don’t take out insurance on your property.

Adding fuel to the industry’s fury, the Victorian Government has asked ICA to meet with it to discuss possible methods to calculate deductibles. ICA has responded saying such a task is virtually impossible – even for the insurance industry.