INEFFICENT government taxes are adding to the high premiums already paid by policy holders, effectively discouraging many people from taking out insurance, according to Royal & SunAlliance managing director Michael Wilkins.
Mr Wilkins said Australia had the dubious distinction of having the highest level of taxation on insurance policies in the world.
The Insurance Council of Australia believes Australian governments cream about $3.8 billion in annual premiums.
Fire service levies, the GST and stamp duty all are placed on most premiums around the country.
The fire service levy, which helps to pay for the State fire and emergency services, means that people who take out insurance subsidise the cost of that service to others who don’t insure.
Then, after the levy increases premiums by up to 90 per cent in some parts of Australia, the Commonwealth places an additional 10 per cent GST on the premium.
Following this, State governments impose stamp duty, which varies between 8 per cent and 10 per cent. In June, the WA Government introduced plans for an emergency services levy to relieve policy holders from the burden of the fire services levy. The new system, effective from July next year, will save 23 per cent on the average household policy and 33 per cent for WA businesses.
The WA Government also has proposed removing stamp duty on workers’ compensation insurance.
While welcoming the WA changes, Mr Wilkins said more could be achieved to remove the damaging long-term economic implications of the current regime.
“Under-insurance is a serious problem in the community, with about one in five homeowners having no home and or contents insurance and one in two tenants having no contents insurance to protect against fire or burglary,” he said.
“More disturbingly, more than 40 per cent of people are under-insured to a significant or severe extent.
“Increasingly, consumers are under-insuring their property to save money, or choosing not to take out insurance at all. If this is allowed to continue the cost to our society will be considerable.”
