Tasmania should move away from funding fire services through a levy on premiums and adopt a model similar to most mainland states, the Insurance Council of Australia says in a submission to a review.

“The Insurance Council is strongly of the view that the existing funding arrangements should be replaced with a broad property-based levy, as has occurred in other states in Australia with the current exception of NSW,” ICA says.

Tasmania released a discussion paper in August on a new Fire Service Act, proposing changes that include funding reforms. A more detailed Treasury Options paper that includes a possible property-based levy and retaining the status quo has also been released.

Submissions were initially due by November 15, but the consultation period has been extended to December 6.

ICA says Tasmania’s levy is imposed on a range of commercial insurance policies, with businesses that insure their premises against fire contributing at the top rate of 28%.

Once GST and stamp duty are added, there’s a 54% burden on top of the premium charged by the insurer on the component of the cover that protects from the financial consequences of fire damage, it says.

A review completed by Mike Blake last year, and released with the discussion paper, found that underinsurance was an unintended consequence of the fire service levy.

“It is an issue which is only becoming more pressing with the increasing incidence of extreme weather events and longer fire seasons as a result of climate change,” ICA says.

“Addressing underinsurance is one of the many strong policy reasons why across Australia there has been a move away from funding emergency fire services via a levy on insurance premiums.”