The Victorian Government has introduced yet another piece of legislation which will impact on the industry and business policyholders by playing games with the fire services levy (FSL). The Victorian State Emergencies Bill, which has been introduced without consulting local insurance or business organisations, will punish companies which self-insure or carry large deductibles.

Frantic lobbying is now taking place to head off the bill, which could result in policyholders paying more in taxes than they are for their “pure risk premium”.

The Victorian Opposition has said it will closely scrutinise the planned legislation, stating there is a clear need for “significant reform” of the system.

With the highest insurance taxes in the world, the Victorian Government now wants to implement recommendations from its controversial 2003 Treasury “review” of fire services funding. These recommendations include inclusion in returns to the fire services of commissions and discounts on premium, a notional premium for deductibles of $10,000 or more, and a statement of amounts collected as FSL.

The Government says the provisions are being pushed through in the interests of “improving equity and transparency of the FSL scheme”. The Insurance Council of Australia (ICA) and the National Insurance Brokers Association (NIBA) are understood to have protested about the Government’s own transparency in the way it introduced the bill and its apparent lack of understanding of risk management.

NIBA CEO Noel Pettersen and Peter Jamvold, ICA’s Regional Manager for Victoria, SA and Tasmania, have written to Victorian Police and Emergency Services Minister Tim Holding to give an industry perspective on the issue.

Mr Pettersen says the Victorian Government uses very large deductibles for its own insurance-buying arrangement, so it “clearly supports the legitimate use of deductibles”.

A survey of NIBA’s members shows more SME businesses in metro and country areas are electing to take on more risk and assume self-insurance business models.

He says insurers don’t normally impose deductibles unless there is justification such as a significant risk hazard or a lengthy claims history. Most deductibles are voluntarily taken by insurance buyers to complement their internal risk management schemes. 

Mr Jamvold told Mr Holding in a letter that “fundamental problems of inequity, inefficiency and lack of transparency… are inherent in the FSL scheme”.

“If implemented, the Bill would raise questions about the sustainability of funding for the fire services arising from the combined effects of penal FSL rates and the increased incentive for tax avoidance.”

Mr Jamvold told Sunrise Exchange News that while industry bodies are still yet to meet to discuss the issue, ICA is “strongly recommending that the insurance provisions of the Bill be withdrawn. It hasn’t been discussed with the industry in any way, shape, or form.”

The bill was originally due to be debated this week, but that is now likely to be postponed until next month.