Due to a combination of a last grab for cash by including $250 million of captial expenditure in the CFA budget over the past 3 years and the ridiculous way that the Baillieu Government has transitioned the move of Fire Service Levy from the Insurance Industry to property rates, insurers were expected to have to increase the FSL rate that they charged their customers.
The first major insurer announced that as from today, the following rates would apply from today 27th April 2012:
So what does this all mean for business in Victoria? Well it is simple! The overall cost of insurance will go up significantly. The following table shows the huge amount of tax that a business has to pay. If we start with a $1,000 base premium and we add the 11.76% higher rate of 95% the total premium comes to $2,359.50. With the triple taxation effect of the GST and State Government Stamp Duty the tax on tax is $209.50.
It needs to be kept in mind that:
- Insurers have had to increase premiums due to the over $5 billion in catastrophe payouts during 2011.
- Business owners need to increase their property and business interruption insurance covers due to the increase cost of reinstating damaged buildings, machinery and plant due to the introduction of the carbon tax. If they fail to do so they will be caught with penalties for under insurance and in the case of a major loss find they do not have enough to replace their assets.
- The $1,000 premium that the insurer collects includes a Federal Terrorism levy.
- Out of the $1,000 premium Insurers have to pay rents, wagers, reinsurance costs, taxes and the biggest expense, insurance claims.
- The pure tax the Government is charging is 139.50% of the premium.
Both the Liberal and National Parties campaigned heavily at the last election on this issue and we now find that through their greed and incompetence adequate insurance is now less affordable than ever.
We all know that people lost their lives in the Victorian bush fires where people who were not insured stayed back to protect their property and perished.
It is the role of any good government to a) protect its citizens and b) the economy. The Bailliue/Ryan Government with its handing of the fire service levy forcing people to go un or under insured combined with their pillaging of WorkCover have demonstrated that it does not support small, medium or big business.
The Victorian Government has justed stated that it will have a $100 million surplus. The real question is at what cost to our economy?
What should have happened is not rocket science. Every other state that has removed Fire Service Levy did it smoothly and without this need for an increase or extra administration.
Knowing that the cost of insurance must go up due to the spike in natural disasters, even if it wanted to sneak in the massive capital expenditure which would not pass the accounting standard in a third world country, all they had to do was pro rata the FSL down each month for the insurance industry and pro rata it up at the same rate on property rates. To expect an Insured to pay a full year’s FSL when their insurance falls due next April, May or June 2013 is just plain dumb.
The problem we all face is that we have come to accept dumb incompetent government as the norm. Or have we? The Queensland election showed that the electorate is not as gullible as our politicians believe.
While we wait for the next Victorian election to show our displeasure it is not going to help business and home owners. I really urge you to seriously consider what you risk when you do not insure. The question I ask you, if something does happen to your home or business, if you are not fully insured, who is going to get what is left? You and your family or your bank/finance company?
If your business is like mine, it is your sole source of income, your major investment, the mortage over your home and your superannuation. It is far too much to risk to not be fully insured!