Australia:General insurers warn insurance taxes are unsustainable

The Insurance Council of Australia (ICA), which represents general insurers, welcomes Victorian bushfire funding but warns insurance taxes are 'unsustainable'.

The Victorian Government said last week in its Budget announcement that A$517m ($400m) would be allocated across several bushfire risk reduction projects. The projects announced as part of the Budget to improve communication, land management, infrastructure and bushfire emergency response are positive investments to reduce the future impact of bushfires on communities and property owners, says the ICA in a statement.

The ICA and insurers have been calling for increased investment in resilience and mitigation measures for more than a decade

Insurance stamp duty

The welcome news is tempered, however, by the Victorian Budget’s projections that revenue from insurance stamp duty will increase by almost one third over the Budget estimates, rising 29% from A$1.517bn in the fiscal year ending June 2021 to $1.959bn in the financial year ending June 2025.

The ICA says that the projected growth in taxes on insurance are unsustainable and means that Victorians would continue to be underinsured or not insured at all.

ICA CEO Andrew Hall said, “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. More resilient communities, businesses, and households mean less disruption to life and faster recovery after a major natural disaster. However, the effectiveness of this welcome Budget measure is tempered by the Treasurer’s own projections that stamp duty on insurance will rise by 29% over the forward estimates to almost A$2bn.

“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, but the Budget papers also show an increasing reliance on insurance stamp duty. 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.”

Source: Asia Insurance Review