By Alastair Mitchell, EBM Insurance Brokers

Another dubious first has been achieved by the Victorian government – the world’s highest taxing government when it comes to property insurance. For the first time in history the combined levies and taxes will exceed the ‘pure risk’ premium from which insurers meet claims, pay expenses, and a return to shareholders.

This latest tax imposed by the government on property insurance is to be levied from 1 July 2007 on all insurance policyholders whose total insured value in Victoria exceeds $50 million. This regulation replaces an earlier failed attempt to further tax those with policy deductibles exceeding $9,999.


This was to penalise those insurers who “sought the adoption of policy deductibles to deliberately avoid making their rightful contribution to the Victorian Fire Services”. It is widely understood that insurers do not fund the Victorian Fire Services. They act purely as the collection mechanism, having passed the tax through to their policyholders. Instead, the net has been cast even wider. The adjacent chart illustrates how a premium will be structured for those falling in the net.


It doesn’t end here; the tax will be even higher if an intermediary has netted a gross premium quoted by an insurer. In the example shown, for every $1 of ‘pure risk’ premium each Insured affected will pay $1.27 in add-ons and taxes. This is a dubious world-first.


Why does the Victorian government choose to ignore the successful West Australian model, where the funding of the fire and emergency services is spread across the community?


Why do the findings and recommendations emanating from the government’s February 2001 Harvey Review of State Business Taxes continue to be ignored? This can only lead to the conjecture that the status quo better serves the interests of government rather than policyholders in Victoria.


To resolve this iniquitous, unsustainable and highly discriminatory insurance tax regime, another independent inquiry needs to be conducted.

The objective should be to reform the method of funding Victoria’s fire services, recognising the value of the emergency services, and to institute a totally transparent, fair and sustainable alternative funding model, which seeks to spread the costs of these highly valued community services more equitably across the community.