The Age has published an article penned by LMI Group’s CEO, Allan Manning, headlined "Fire funding belongs to the bucket brigade". Allan discusses the ridiculous method of funding the fire services.
The article reads:
Fire funding belongs to the bucket brigade
February 17, 2009
It’s time to change a funding model based on an event in 1666.
THE horrific bushfires that have caused such widespread damage this month demonstrate the need for fully funded and highly trained fire and civil defence services. The human cost and the monetary cost means that to do otherwise would be negligent in the extreme.
No doubt, and with some justification, there will be calls for additional funding from the fire services, but it is no longer appropriate that most of the funding is borne by those prudent enough to insure. It must be borne equally by all those who benefit.
In Victoria, 77.5 per cent of the funding comes via the insurance industry which is forced to charge a fire services levy, of the remainder, 12.5 per cent comes from the State Government and 12.5 per cent from local authorities, which pass it on in their property rates. Many fire brigades also raise funds.
Considering the level of impost on the insurance industry, you would be forgiven for thinking it was a charge on alcohol or tobacco products. Again using rural Victoria as an example, if you own a business and wish to insure your business assets and/or protect your business income, then for each $100 of premium (including terrorism levy), you pay nearly double due to taxation (the table shows the calculation for commercial property).
You do not have to have a PhD in economics to know that if you double the cost of any service you reduce the demand.
It is heartbreaking to me as I assess home and business claims following the "Black Saturday" bushfires that there is such gross under insurance. Worse still, many have no insurance. In the case of a business, the saving they thought they were making in a business expense has had the effect of providing inadequate protection for their livelihood and that of their employees. A recently published report estimated that 1170 employees lost their job as their employers’ businesses failed following the storms that battered Newcastle 18 months ago. It is equally shattering for home owners.
Clearly the level of taxation on insurance contributes significantly to this problem. I am sure a study of the Victorian bushfires will show similar findings.
This all flies in the face of John Locke’s (1681) position that "Government has no other end but the preservation of property". I take this one step further and suggest that the primary role of government is to encourage and protect business, and safeguard economic growth.
Unlike the alcohol or tobacco industries that place a strain on government, particularly in the health sector, insurance assists the Australian economy, paying out an average $58 million every business day (over $14 billion annually). With the bushfires in Victoria and the storms in Queensland already this year, this figure will rise. On the other hand, the level of taxation on insurance means the governments of Victoria, NSW and Tasmania are failing miserably in their primary role. It is time to change.
The entire community benefits from the CFA, the MFB, the SES and other civil defence authorities. Their funding should not be left to an archaic, unfair and inefficient fire service levy on insurance developed after the 1666 Great Fire of London.
The more enlightened states have moved the bulk of their funding to property taxes where everyone contributes, whether they be owner or tenant. In the aftermath of the fires there will be much soul searching by the fire authorities and government. I urge that the methodology for funding be included.
Dr Allan Manning is managing director of insurance advisers, LMI Group.