If it were up to the National Insurance Brokers Association (NIBA), insurance-based taxes such as Tasmania’s Fire Service Levy and the Emergency Services Levy in New South Wales would be scrapped.
In its 12-page submission to the Royal Commission into National Natural Disasters Arrangements, NIBA highlighted the unfair nature of certain funding models as well as the significant increase in premiums brought about by compounding tax systems.
NIBA noted: “In NSW taxes and levies can increase the cost of some insurance policies by up to 70%. In Tasmania, premiums can be increased by almost 34% as a result of taxes and levies. Recognising the impact these taxes have on insurance affordability and risk mitigation, the ACT (Australian Capital Territory) abolished stamp duty on all insurance premiums, meaning policyholders only pay a single transaction tax (GST) on their insurance premiums.
“For policyholders, many of whom are facing an uncertain economic future, these taxes make insurance an unaffordable luxury, rather than a necessity of homeownership. Policyholders may be forced to reduce the sum insured value of their property or forgo insurance entirely, leaving them open to significant financial liability if a disaster were to occur.”
According to the trade body, the recent bushfires on the Mid North Coast brought to light instances where owners lost their properties and did not hold appropriate coverage.
It went on to assert: “NIBA recognises that taxes form an integral part of the fiscal social contract that exists between governments and their people. However, inefficient and poorly designed tax systems should not be stacked on top of each other for the sole purpose of collecting revenue at the expense of the public good.”
NIBA pointed out that all other mainland states have abandoned the insurance-based levy in favour of a fairer and more broad-based property levy. It is in the association’s view that this arrangement – wherein property owners contribute to the funding of emergency services through council rates – overcomes the major deficiencies of the current insurance-based models.
“Unlike property levies which spread the burden of funding emergency services across the broadest range of beneficiaries,” explained NIBA, “insurance-based levies have been widely criticised for being inequitable, forcing responsible property owners to pay for a service that is beneficial to all of society, while those who do not insure their risks continue to receive the benefits.”
NIBA said it strongly supports a shift to funding fire services by way of a property levy. It declared that such a move would increase not only efficiency and effectiveness but also simplicity and transparency.
“It would eliminate the current compounding of state and federal taxes and encourage individuals and businesses to appropriately mitigate their risks, reducing reliance on government assistance post-event,” stated NIBA.