With justification, the Insurance Council of Australia (ICA), the National Insurance Brokers Association (NIBA) and many brokers often complain about the government taxes on insurance premiums. One of their arguments is that abolishing or at least reducing this cost would help make insurance more affordable. In South Australia, the state with the highest stamp duty rate in the country at 11%, rather than complain about taxes, some brokers just get on with it.
"Most clients understand and accept the State charges, it's the overall premium that leads to underinsurance decisions," said Adam O'Reilly (pictured left), corporate authorised representative with Austbrokers Terrace in Adelaide.
Daniel Webber (pictured right), director of Webber Insurance Services, agreed with this sentiment.
"The majority of our business is financial lines so this [stamp duty] isn't a major factor," said Webber, who is also based in Adelaide. "I can't recall a situation where it's been an issue and the client has made changes to reduce [insurance cover]."
The ICA states that depending on the state or territory, government taxes and charges can add between 20% to 40% to the cost of a premium. The taxes are levied in proportion to the premium so they penalise those paying more already because of, for example, the greater extreme weather risk they might be facing. The ICA's position is that removing these charges would improve affordability, strengthen community resilience and reduce reliance on government relief after disasters.
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NIBA has taken the same case to Parliament. Appearing before the Parliamentary Joint Committee on Corporations and Financial Services in May, the association called for the abolition of insurance-based emergency services levies and consistent stamp duty treatment across all states and territories. The ICA says stamp duty is one of the taxes compounding affordability issues for insurance products. "Its removal would significantly reduce premiums, making insurance more accessible and affordable for all Australians," says its website.
South Australia is where that argument can bite hard. It carries the highest standard duty rate in the country at 11%, ahead of every other state.
So what O'Reilly and Webber described could be a gap between the policy argument and the placement conversation. Neither disputes the cost but both said it is not the variable that moves a client.
O'Reilly's point is that clients treat the duty as a known quantity and react to the total. A premium that has risen on rate, sum insured or loss history is what produces the conversation about reducing cover and the tax line sits inside that number rather than driving it.
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Webber's point is narrower and he makes the qualification himself. A book weighted to financial lines is less exposed to the classes where duty is most visible and on his own account the issue has not once produced a coverage decision.
That is not an argument against reform but it is an observation about where the insurance coverage pressure actually shows up. The ICA's own framing probably concedes as much: the tax is objectionable because it is proportional and therefore compounds, not because it is independently decisive. For example, for an $11,000 premium in South Australia the duty is $1,100. The client is looking at the $11,000.
The tax reform case rests on aggregate affordability across a market and the argument is made in submissions, inquiries and pre-budget campaigns. The broker's case is made one renewal at a time. Both can be true. In Adelaide the two brokers working with the highest stamp duty on insurance premiums in the country are just getting on with it.
