THE MORE that can be done to increase understanding about the risks of non-insurance and under-insurance will serve the community at large, according to NIBA.
Offering support that the Victorian Government has initiated a pilot study soon to be undertaken of the levels of non-insurance and under-insurance, NIBA says the better the community will be at tackling this very real problem.
He noted that submissions in response to the Green Paper from interested parties are not being called for until June 2010 with a closing date for submissions being July 15 2010.
The Government will consider the final reports from the Bushfires Royal Commission and the Henry Tax Review before releasing, towards the end of 2010 or the beginning of 2011, a White Paper outlining its final position.
A White Paper signifies a government legislative intention. Green Paper denotes a study without commitment.
Noting that the rate of fire services levy for Victorian country commercial insurance is 84% of the basic insurance premium and with GST and stamp duty applied the total taxes come to a “staggering 123%” on basic premium, Mr Pettersen said “these extreme rates of taxation drive normally prudent people away from insurance”.
The Green Paper said the 2003 Review by the Department of Treasury and Finance found “the current model was the best way to fund Victoria’s fire services.” This statement appeared to NIBA to misrepresent the 2003 review’s report, Mr Pettersen said.
The Department of Treasury and Finance Report drew no firm conclusions as to a preferred model nor did it make any recommendations.
The Green Paper suggested that as premium reflected the fire risk there must be a direct relationship between the fire risk and the fire services contribution. Such a proposition was a gross over-simplification of reality and was inconsistent with the way in which the property insurance market works.
“The Green Paper ignores some important monetary implications of having a fire services contribution paid by way of insurance. It ignores GST and Stamp Duty,” Mr Pettersen said.
“The Green Paper indicates that the fire services levy is expected to raise $510 million for the Victorian Government in 2009/10. The total financial implication of the levy on individuals is, however, far greater than that figure.
“Policyholders will have to pay GST and Stamp Duty on top of their fire services contribution, something that would not be necessary if a move was made to property based fire services funding.
“Policyholders will be required to pay $617 million, made up of $510 million levy, $51 million GST and $56 million in Victorian stamp duty. A 21% increase on the figure used in the Green Paper.”
This article is kindly reproduced with the approval of John Heath – InsuranceNewsAustralia.com.au