The Victorian Government predicts revenue from insurance taxes will increase by 7.2% to $1.6 billion in the next financial year.

It estimates insurance tax revenues of about $1.73 billion in 2022/23, with further increases to $1.84 billion and $1.96 billion respectively in the following two financial years.

The Insurance Council of Australia (ICA) has labelled the predictions, which were contained in the budget released last week by Treasurer Tim Pallas, as “disappointing”.

ICA CEO Andrew Hall says the projected increase has “tempered” the state’s plans to set aside $517 million to fund several bushfire risk reduction projects.

“Insurers have been calling for some time for this scale of investment in resilience and mitigation measures, and it’s pleasing to see the Victorian Government has heard those calls,” Mr Hall said in a statement.

“However, the effectiveness of this welcome budget measure is tempered by [Mr Pallas’s] own projections that stamp duty on insurance will rise by 29% over the forward estimates to almost $2 billion.”

He says stamp duty on insurance is a “retrograde revenue measure” that numerous inquiries and reviews have found leads to household underinsurance or non-insurance.

“It’s disappointing that not only does this budget fail to reform this problem, in fact the budget papers show an increasing reliance on insurance stamp duty,” Mr Hall said.

“The ICA urges all state and territory governments to advance tax reform and remove stamp duty on insurance products to increase insurance affordability for all Australians.”

* An early version of this article carried in our Daily service on Friday implied that the rate of insurance stamp duty in Victoria is increasing. The rate remains at 10%, and the increase relates to the amount of tax collected.