While the associations covering the investment end of financial services have much to be happy about in the Henry report and the Federal Government’s response, the enthusiastic initial reaction of the general insurance associations is hard to understand.

The Henry report does little more than mention the fact that general insurance taxes are toxic and should be abolished. Its recommendation (79) to abolish insurance taxes is explicit enough, but there’s more than a touch of uncertainty about replacing it (and others) with a broad-based “cash flow tax” (55).

Recommendation 79 takes the industry’s case no further forward than Justice Neville Owen’s similar recommendations in the HIH Royal Commission report published in 2003.

The Government wanted the Henry report out of the way before the federal election cycle kicked in, and it has achieved that by acknowledging Henry’s comments, making some changes and moving on. It has already set the agenda for the next election, based around reform of the health sector, and needs the support of the states to achieve that change. It’s unlikely to see any advantage in interfering with the states’ favourite low-profile cash cow.

So, for now at least, the general insurance industry has once again missed the boat.

And we can’t expect the state opposition parties in NSW and Victoria to reform the grossly unfair fire services levy system by themselves. As they approach elections in which they have better prospects than they’ve had for a decade, why would they seek to replace the levy on insurance policies with a local council collection system that’s likely to upset voters?

The general insurance industry would have done better to curb its initial enthusiasm for receiving little more than a mention in the Henry report, and instead expressed concern that governments at all levels are continuing to pay little more than lip service to the need for a total removal of taxes that deter Australians from insuring their assets properly.

Terry McMullan – Publisher