Wednesday, February 17, 2010

FSL and Insurance

IAG blames fire levy for blowout 
  February 17, 2010 12:00AM 

INSURANCE Australia Group says it has been forced to add $235 million to the cost of its policies because of the "inequitable" fire service levy.
The general insurer's chief executive, Michael Wilkins, has called for a fairer system under which instead of "slugging" only people who take out home and contents, and business, insurance, all property owners would share the responsibility for funding fire services.
Insurance companies in NSW, Victoria and Tasmania have to contribute to the funding of fire brigades at the beginning of each financial year.
Mr Wilkins said that after the Victorian bushfires last year, the cost of this funding for insurers had risen significantly, forcing premium rates to rise.
Suncorp said the fire service levy accounted for 20 per cent of the cost of its metro home insurance policies in NSW and Victoria.
For rural properties in Victoria, it can be as high as 31 per cent of the base premium.
Last financial year, IAG, which raised premium rates by about 5 per cent for home and motor insurance, added $235m to the cost of its home and contents, and business, policies to cover its contribution. The $24 billion general insurance industry has been campaigning to get rid of the controversial tax, claiming it contributes to Australia's high level of under-insurance due to the impact on premiums.... 
In its submission to the Henry tax review, the Insurance Council of Australia said determining how much to add to premiums to account for the contribution was difficult and often led to under- or over-collection by insurance companies.
The amount insurers contribute to fire services is based on their market share of the total "deemed" premium pool for the year ahead.
The concept dates back to when insurance companies had their own fire brigades, which would rescue a home only if the owner held a policy with them.
Data collected in 2007 by the Insurance Council of Australia showed that insurance taxes in NSW and Victoria, including the fire service levy, goods and services tax, and state government stamp duties, could add more than $40 for every $100 of premium on a metro home insurance policy.
"We think these are regressive taxes that actually lead to non-insurance and under-insurance because of the burden that they place on the cost of insurance," Mr Wilkins said.
The Australian Financial Centre Forum, a government-appointed panel, has recommended all state taxes and levies on the general insurance sector be abolished to help address under-insurance in Australia.

No comments: