Another broker angry at the NSW Government

I received this email last night and it mirrors many phone calls and emails I have received.

“The NSW ESL Insurance Monitor has now gazetted a new Section 30 Notice which requires premium comparisons to be provided with renewal invitations and renewal schedules for residential property insurance in NSW from 1 July 2017.”

At what point does the State Government pull their head in & stop meddling in our Industry; specifically in areas that really have nothing to do with them?

Sorry to sound aggressive Allan. It’s just that, if consumers don’t like their renewal premium, they already have ample facilities at their disposal to shop around.

Further, this outrageous new “requirement” is totally disingenuous and simply propagates comparisons on price alone. It just isn’t a good look.

Where is the Government’s warning to review the quality & extent of cover, at the same time as comparing cost?

Thanks Allan – Gary. [surname and email provided]

I could not agree more. I seem to be constantly writing to politicians, most recently Nick Xenophon explaining that insurance is not about price. It is about protection and that is what the New South Wales government completely forgets. No one remembers the price of insurance when they have a claim occur.

What they want (and need) is coverage that indemnifies them for their loss or damage and has a sufficient sum insured, limit or sub-limit high enough to meet the cost. On top of this they look for a fair and reasonable claim service that is proactive and does not take a delay, deny, defend approach.

If anyone can get all of this in one policy and assure me that insurer will not have gone to God when I need them sign me up!

Let us see this for what it really is. The New South Wales government completely messed up the transition of Emergency Services Levy from the insurance industry where it has not been in Queensland since 1985 (nor in UK since the mid 1880’s) on to property rates where it ought to be so that all the community pay it. How they messed it up when they were the last state, is beyond my comprehension and one of the best examples of incompetence in government I have ever seen. How can anyone trust them after this.

One of the oldest political tricks in the book is to move the focus off your own failings and divert it elsewhere. We are constantly being demonised by the press and government and an industry who is incapable or unwilling to fight back, so we become the fall guy and the whole nonsense with the appointment of an insurance monitor who of all people should know better is showing examples of price differences between policies that are chalk and cheese.

I think every broker and insurer should comply with the request but also show just how much the New South Wales is taking of the total cost of insurance and in particular the completely unconscionable tax on tax on tax where the New South Wales Stamp Duty on insurance is a 10% on the premium, the Emergency Services Tax, and the Goods and Services Tax (“GST”), with the GST being applied to both the premium and the Emergency Services Tax. So it becomes triple tax.

If the New South Wales Government were genuine about making insurance more affordable, which only helps protect their citizens and economy by the way, then remove the taxes which is adding over 20% to the cost of home, home contents, and business property and business interruption premiums.

PS: I would also add a how to vote for one of the opposition parties in the same envelope if they gave a commitment to remove the Emergency Services Levy from insurance.

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Happy to see some relief for Insurance Taxes in NSW (unless there is yet another back flip)

The NSW Government is in line to win the Olympic Gold Medal in Back Flip Gymnastics

New South Wales Treasurer Dominic Perrottet says the state’s 2017 budget will relieve cost pressures for 600,000 small businesses in the region through the reduction of red tape, including by axing insurance duty on a range of policies for businesses with annual turnover of $2 million or less. As an aside, I am convinced governments want businesses to stay small for as soon as you grow and of course employ more people you end up paying a lot more government charges with Insurance Taxes being added to the insidious Payroll Tax.

The 2017 budget, which claims to deliver a $4.5 billion surplus, pledges to relieve cost of living pressures for families and business owners, and includes a $318 million plan to improve the viability of small businesses by removing insurance duty for commercial vehicle, professional indemnity, product and public liability, and crop and livestock insurance from January 1, 2018.

This will mean businesses with an aggregate turnover of up to $2 million will be encouraged to “take up more appropriate levels of insurance by removing the disincentive caused by higher insurance premiums”, according to the budget papers.

Insurance duty is paid to the state government by insurance providers and is calculated as a percentage of the policy premium. According to the Office of State Revenue, in NSW this can mean additional fees, which are often passed on to policy holders, range from 2.5% to 9% depending on the policy type.

Of course this is all dependent on the NSW Government honouring their word and not doing a back flip as they so cruelly did just one month out with the Emergency Services Levy.

 

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Is it any wonder the public has lost faith in politicians? NSW ESL what a mess!

No news article has caused my phone or email to run to hot as the one announcing the New South Wales back flip on the removal of the State’s Emergency Services Levy earlier this week.

Let us review the facts. The New South Wales government are the last mainland state in Australia to remove the levy. They did not have to reinvent the wheel, all they had to do is copy one of the other states that have gone through the change with little or no drama and pick the one that worked best.

They chose Victoria to model their change on, which to my thinking was the most unfair for the public, but created the greatest windfall for government and made it the most difficult for the insurance industry. (But this was all masked by beating up on the insurance industry).

The NSW government also engaged, with huge fan fare, high profile chest beating Allan Fels  to oversee it all.

Now a few people complain and with just one month to go it all gets put on hold. Like all the people who wrote or phoned me, I cannot believe this has occurred.

My own wife came into me shaking her head as she had paid the rates on our Sydney offices including the new Emergency Services Levy. How many other businesses would have done the same. Do we get this back before we get a new invoice from our insurer asking for it from them for them to comply? Think of all the extra work this will create for local authorities, the insurance industry, and business and home owners.

The irony here is that, within the insurance industry, every one of us should be, with only one month to go, applauding the NSW Government for removing the disincentive for full insurance and grossly unfair hidden tax. Instead we are shaking our heads in complete disbelief! View full post…

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Finally something a government has done that actually makes sense!

It was really great to read that the Victorian Government has removed stamp duty from insurance on farm policies. Well done!

This on top of the removal of Fire Services Levy is a great initiative and makes the vital protection provided by insurance affordable by a segment of our economy who can least afford not to have it.

Now if only other governments would show as much leadership and good sense. Three come immediately to mind that should follow suit.

Home and business owners in North Queensland are struggling due to the high cost of insurance yet, after Cyclone Yasi and the Brisbane Foods in 2011 the Queensland State Government increased stamp duty on insurance from 9% to 10% (a full 1% increase at a time when a government with even 1 eye open should have seen the importance of business and home owners to be fully insured.

Thorough research by Federal Government Departments has shown that the pricing of insurance in North Queensland is fairly priced on the risk being transferred to insurers. Thank goodness those advocating for a Mutual did not succeed as Tropical Cyclone Debbie would have probably wiped out the fund, everyone’s investment and left many people uninsured.

Let’s save all the money on enquiries and address the elephant in the room. If the Queensland Government followed the lead of Victoria and removed Stamp Duty followed by the Federal Government reducing the Terrorism Levy for those in North Queensland the cost of insurance would fall by more than 10%!

The decision by the New Zealand Government to drastically increase the cost of insurance due to changes to the Fire Service Levy defy understanding for they, like the Queensland Government, should understand the value to their economy of everyone being well insured.

The third Government in the trio is the Tasmanian government, who currently holds the record of taxing their business owners the most through insurance. This of course is a disincentive to development.

Like people around the world, I have become greatly disillusioned with the lack of statesmanship in our politicians where it is power at all cost with more than just a little bit of ego gone mad to boot. It is in this frame of mind that I see some hope and refuse to believe my inner doubt that the decision was made to buy votes and not protect the State’s economy. The reality is what ever the reason, I am extremely pleased. Well done Victoria.

I witness far too often the heartbreak and financial stress that home and business owners face when they are not fully insured and so I urge Victorian’s benefiting from this change to take this valuable opportunity to review your insurance and make sure you are fully protected to make the most of your Government’s wise change of policy.

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How can such a great country as New Zealand get it so wrong?

Kate Sheppard who along with Sir John Hall and Sir Julius Vogel led the fight to get women the vote in New Zealand.

Of all the countries in the world, I admire New Zealand  more than any other. Their political leaders were, in 1893, the first in the world to give women the vote. It is the country that nurtured the pure genius of Nobel Prize winning scientist Ernest Rutherford. No such list would of course include the bravery and determination of Sir Edmund Hillary. Rutherford and Hillary both being childhood heroes of mine. Of course, you cannot overlook sport, where New Zealand more than any other country punches, not just a little, but way, way above its weight.

Source: http://www.mch.govt.nz/perspectives/earthquakes/

Due to the earthquake exposure that the country faces and the huge amounts of foreign capital that has been injected into the country through insurance and reinsurance, you would be hard pressed to find a government that should not understand the benefits of a community that is adequately insured.

So with this short two paragraph opening, I sit here and think where have the great leaders and thinkers, particularly in government and Treasury, gone in New Zealand?

How can just over one hundred years ago, New Zealand be one of the most forward thinking progressive societies in the world and yet today be one of the very last in the world to realise that funding the emergency services through insurance, thereby significantly increasing the cost of such a vitally important service & protecting to the people of New Zealand’s home, businesses, communities and its very economy. It is so very WRONG!

A first-year economics student, if he has not heard it at school, learns that if you increase the price of any commodity or service, people buy less. Governments know this, that is why they tax alcohol and tobacco, so that we consume less and as a community we are healthier and are less a burden on society and the government health system.

But general insurance is not a burden on society or government. It is the exact opposite.

All the research around the world shows that when government overly tax general insurance, people buy less. They either reduce their sums insured, and/or fail to insure their contents or business interruption.

So let us take small business as an example. It is a huge employer in every country. The business owner sees the cost of insurance go up and so they do not insure their assets fully and decide that they will take a risk on business interruption. The business has a fire or massive storm. The business fails, the business owners lose their business and perhaps if the home is mortgaged, their home. The employees lose their job. Creditors do not get paid. Who is the winner here?

Now let us multiply this by the number of people in a small town. Everyone is in the same boat. Even if some insure fully but say, the draw card businesses that attract tourists or the big employer businesses are the ones that cut their insurance cost. An earthquake or other natural disaster hits. That community is devastated. The children and or grandchildren who were being funded into schools and universities by the business owners and their employees may no longer have the resources to fund the schooling. They cannot move into the family business because it is no longer there. These people get into a cycle of poverty that they cannot get out of, not just for one generation but many.

The sea of for sale signs following a natural disaster where the owners were not adequately insured

Think I am exaggerating, go and visit some of the small towns in Victoria that were wiped out in the ‘Black Saturday’ bush-fires and see the devastating effect on those communities, brought about by a greedy government that ate the golden goose through heavy unsustainable fire service levy. It took the loss of 173 people, many of whom stayed back to protect uninsured homes, farms and businesses before Victoria removed the levy.

I do not want to labour the point, but in my experience in insurance claims, which is fast approaching a half a century, even a prudent business person who understands the value of a quality insurance program will cut back when they see the price go up substantially. While they may keep their existing sums insured and business interruption insurance they will not increase the existing covers and/or not take out other covers such as cyber insurance which is now vital in our digital age.

Every civilised society needs well-funded, well-trained, well-equipped and well-led emergency services. The brave women and men that undertake this vital work for us deserve our full support.

The simple fact is that every single New Zealander and even those that visit the country benefits from the great work that the New Zealand emergency services provide. Every New Zealander needs to contribute their fair share, not just those that are prudent and risk averse enough to insure.

The broader the tax base for the collection of the funds to meet the cost of running the emergency services, the better. The best way known is through property rates. This way, everyone pays, including the visitors to the country through a small charge on every product and service they consume based on the cost to provide that service.

There are many papers and articles written on the subject on just how regressive taxing insurance is. Here are just a couple if you would like to read more from experts in equitable taxation:

By KPMG: https://home.kpmg.com/au/en/home/insights/2015/12/tax-reform-property-services-tax-stamp-duty.html

By Deloitte:  http://www.insurancecouncil.com.au/assets/report/Deloitte%20Access%20Economics%20-%20Impact%20of%20removing%20stamp%20duties.pdf

Brexit campaign slogan

I am sure that politician’s the world over are looking at what is happening in the world today with Brexit, President Trump, etc and scratching their heads and asking why?

The simple answer is that people are moving away from political parties who are not listening to their genuine concerns, not being honest and not protecting their precious way of life.

Having a hidden tax on insurance is NOT honest, it is NOT protecting the hard-earned wealth of its citizens and it is certainly NOT protecting New Zealand in the way that it deserves or needs in the 21st century.

The great country and its fantastic people of New Zealand deserve better.

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The New Zealand Government needs to abolish the Fire Service Levy on Insurance

Stop Taxes Sign In RedAs you all know, I have worked strongly over the years looking at getting the Australian government to abolish all tax on insurance, namely the Fire Service Levy, from all states. We have been successful in many areas, the New South Wales government is currently phasing out the Fire Service Levy there.

Last month however I could not believe that while Australia has almost got rid of Fire Service Levy in all states, the New Zealand government elected to increase it by a staggering 40%.

What has been proven in Australia, time and time again is that to impose tax on those prudent and risk adverse enough to insure is a disincentive, causing people to not insure or if they do to under-insure themselves, ie insure for less than their total sum insured.

The latest spate of earthquakes should be a stark reminder to the government of New Zealand that it is in everyone’s interests, individual insured’s, communities and the national economy that people are fully insured in the event of a standalone fire or a major catastrophe such as an earthquake.

As we have reported so many times now, everyone in the community benefits from a fully funded and highly trained emergency service and as such all of us in the community should pay for it, not just those that insure.

The tax ought to be immediately removed from insurance and placed on property rates so that every single person in the community whether they are a home owner or renter, contributes towards the fire services.

It is now time for the New Zealand government to have a close honest look at Fire Service Levy’s and do the right thing in removing it from insurance.

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Blog Question on Fire Service Levy increase

fsl taxI received this question from an insured who is concerned about the Fire Services Levy, to be correct the Emergency Services Levy. I have withheld the name of the insurer as is my normal practice.

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I received my home and contents insurance renewal for a policy dated 7/11/16. The Financial Services Levy (“FSL”)  included was $181.85 (estimated by [my insurer]). Along with a letter explaining that the FSL would cease on 1/7/17 and be paid with your Council rates. Compared to last year, the FSL had increased by 23% and if charged, would actually for the period up to 1/7/17 where it would be abolished, it had increased 85%. My premium had not changed materially.

I called [my insurer] to query why the FSL had increased and was told it was a Government charge and they just pass it on. The percentage rate used by [my insurer] in 2015/16 was 18%  and 2016/17 it had increased to 23%.

I was told to contact the Department of Fair Trading insurance monitor, which I did and was told that there had been no increase in the FSL rates and that the insurance company set their rates.

I called [my insurer] back and said I thought the increase was excessive and was again told that it was a Government charge. But also that the $181.95 may be for the whole period of the policy to 7/11/17 and not pro rated. I said that this means that not only have [my insurer] increased the premium but also that they were going generate extra profits but not passing on the savings for the period after 1/7/17.

The call centre and their supervisor could not provide any better explanation.

I have passed my complaint onto the Insurance Monitor DFT, but wonder how many other customers have simply paid the increased FSL without questioning the huge increase in charges.

Regards

Peter [surname and email provided]

I replied as follows:

Hi Peter,

The whole system is quite complex and I feel that the transition which should have been handled as you suggest as a sliding scale on a pro-rata basis has not been followed by the NSW Government as it was with all the other main land states, except Victoria.

I see that the base premium went slightly up from your email but if that went down the amount insurers have to pay as a proportion of the premium has to go up. The amount each insurer pays is also based on the market share of each insurer.

As I say it is a very complex issue and I cannot work out the correct amount that should be charged/paid without an extraordinary amount of additional data.

It would be prudent, I feel, if Insurers did provide some basic training to their call centre supervisors on the makeup of the charge so that you did not have to play telephone tennis ringing back and forward as you have done.

What I would strongly suspect is that insurers will a) not want to be fined nor b) have their reputation damaged therefore they will be as accurate as possible on the amount of the levy charged and if anything be conservative.

Clearly you are concerned and by reporting your concern to the official monitor I am sure the matter will be reviewed and any adjustments that may be necessary will be done.

From my own perspective, as someone who has property in New South Wales, I will be glad when the whole transition is over with and the charges are collected through rates as then everyone in the community who benefits from the emergency services helps fund it and not just people like you and I who are prudent and risk averse and take out insurance. With around 1 in 4 homes and units not having contents insurance, for example, the current way of collection is clearly not fair.

Thanks for sharing your concern. The good news is that this will be the last year of it being linked to your insurance.

Regards

Allan

 

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Saved a few dollars and lost the farm

InsuranceThe following is a sad tale that was reported in the Digital Age News (we can not call them newspapers any more). This sort of thing sickens me to the core. The moral of the story is that bad things happen to good people. I hear a lot of people say “I cannot afford insurance”. I say you cannot afford not to, as these farmers found out the hardest possible way.

Secondly, insurance is now cheaper and there is simply no excuse. I and many others fought hard and long to get the Victorian Government to remove Fire Services Levies in Victoria and so premiums for fire insurance on farm properties has dropped by more than 50% just in the drop in taxes alone.

While I explained why I do not donate to fire victims in an earlier post, I do not want this to in any way stop anyone else from donating if you feel so compelled.

While I have the highest regard for our police force and those men and women who serve and protect us all, it is disappointing that the system let us down and we see yet another reason why our state system is sometimes more detrimental than beneficial. It is a lot more than just mismatched rail gauges as we were taught at school.

Finally, one issue we have to address as a community is who we should let out on bail and who should be put behind bars. I would urge our governments to look at work done in the US, and in particular New Jersey where they used big data to predict who was likely to re-offend and who was not. This work resulted in lowering the number of people in prison AND reduced the crime rate. The use of big data correctly analysed was provided to judges and magistrates and armed with this knowledge significant changes for the better were achieved.

video-theage-ipadHere is the sad story as reported in the professional way that the Age is rightly renounced for. The journalist is Tammy Mills.

Rick and Sandra Zipsin were used to hosting drifters on their cattle farm on the edge of the Victorian high country.

So it wasn’t unusual when Gino and Mark Stocco came looking for work at the Zipsins’ farm in Glenburn , 30 minutes south of Yea, in the wake of the 2009 Black Saturday fires .

‘‘ We had a lot of fencing to do,’’ Rick said. ‘‘ Looking back now, they probably targeted this area because they knew people needed a hand.’’

The father and son were nomads, they moved from farm to farm across three eastern states and their work couldn’t be faulted.

‘‘ You couldn’t pick anything on them; their work was neat,’’ Rick said. Little did Sandra and Rick know then, but the Stoccos were also developing a nasty habit of turning on their employers at the slightest hint they weren’t wanted.

Gino Stocco, 59, and Mark, 36 had been on the run from the law for eight years when they exploded into the public’s consciousness.

They had been wanted for criminal damages on farms in Queensland, NSW and Victoria when they shot at a police car in Wagga Wagga, in southern NSW, and sparked a 10-day manhunt in October last year.

While they await sentencing in NSW after pleading guilty to the murder of a caretaker and a string of offences, Victorian detectives recently interviewed the pair for ramming a police car at Saint James and the fiery aftermath of their work for the Zipsins.

After the Stoccos’ first stint at the Glenburn farm in 2009, they dropped in unannounced year after year. One day the Zipsins asked to be left alone. ‘‘ We said for them to give us a break,’’ Rick said.

‘‘ I said you can come back, but maybe give us a year’s time.

‘‘ We didn’t know they were that bad then.’’

The Zipsins had no insurance on their sheds when the Stoccos did come back; the fire levy had been introduced and rates were through the roof.

‘‘ We thought we’d cancel the sheds and machinery off the insurance policy for one year and reinsure when the rates return to normal,’’ Rick said.

That’s when the attacks happened . Two fires three months apart burnt down three sheds and destroyed crucial machinery, causing almost one million dollars in damage.

The police investigation at the time was fruitless and it wasn’t until  Queensland farmer Doug Redding, also an alleged victim, handed out his own ‘‘ wanted’ ’ posters that the Zipsins thought it could have been the Stoccos.

The three state police forces, according to one interstate officer , were not talking to each other.

To the individual officers on the ground, the criminal damage and arson left behind were isolated crimes that didn’t amount to much.

The Stoccos’ off-the-grid lifestyle – no phones, no credit cards, no nothing – didn’t help police trying to track them. And then Wagga happened.

‘‘ We didn’t know they were that bad,’’ Rick said.

‘‘ The bit that scared us was when they were down here in Victoria on their chase and everyone – all the coppers – were up in Yea and we were out here on our own.’’

The Zipsins welcomed the action from Victoria Police, but said it was too late to recover the losses on their farms. Victims of crime compensation is also out of the question as property crime is not covered by it.

The Zipsins, who have two children in primary school, remain crippled financially and psychologically.

They have sold their cattle, leased their farm out and haven’t been able to replace their machinery or sheds, which are still burnt-out shells.

‘‘ We built it all up and it’s all gone,’’ Rick said. ‘‘ It was the Stoccos all along for no good reason at all.’’

It is expected the Stoccos will be extradited to face Queensland and Victorian charges upon the completion of their NSW sentence.

A fundraising page has been set up to help the Zipsins rebuild their farm. To donate, see gofundme.com/ 2ay8e8aw.

Copyright © 2016 The Age

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New Zealand and Tasmania still out of step when it comes to Fire Service Levy

fsl taxI share the disappointment of the Insurance Council of New Zealand (ICNZ) that the New Zealand government continues to place the burden of funding the fire services in New Zealand on those that are risk adverse and prudent enough to insure. The trouble continues to be that there are a number businesses and individuals that elect not to insure whether it be their car, home or business and they get a free ride receiving exactly the same service as those that insure.

 

In most jurisdictions around the world, governments have realised that funding fire services through the insurance industry is a disincentive to full insurance which has an adverse effect on individuals, employees, communities and the economy.

In a country such as New Zealand that suffer significant natural disasters, it is in the governments and every single individuals interest for the community to be fully insured and removing the unfair tax on insurance is a start towards this important end goal.

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Fire Service Levy in NSW finally to be scrapped

fsl tax It was a great Christmas present to hear that the NSW government have, after many years of talking about it, finally agreed to remove fire service and SES levy’s on insurance.

This will greatly improve the affordability of insurance for both home and business owners in property, construction and the all-important business interruption.

The only disappointing thing is that we have to wait another 18 months before it is implemented with the tax to be replaced by a fairer more broad based tax linked to property rates which will take effect from the 1st July 2017.

Why I say this is fairer is that the whole community benefits from a well-trained and funded fire and state emergency service and we should all contribute to cost of this, not just those that are prudent and risk adverse enough to insure.

The NSW government are to be congratulated for finally bringing their state in line with all the other mainland states and territories and now the pressure is on Tasmania to remove it from their business owners.

A number of people have been involved for many years to have this tax removed, including NIBA, The Insurance Council of Australia, LMI Group through its NoTaxOnInsurance initiative and others. All are to be congratulated for their combined efforts.

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