Affordability of Insurance and Government Taxes
Interestingly, while the ongoing affordability of insurance was a topic of keen discussion, particularly through the great panel session hosted by Terry McMullan, the issue of Fire Service Levy did not come up in any of the sessions that I attended.
The ongoing affordability of insurance is rightly an issue that the insurance industry and all of us have to consider. In the case of New Zealand, it is due to the earthquake losses and in Australia, primarily due to the flood and weather related risks. I think that we all accept that the old hard and soft cycle is disappearing as insurers and reinsurers alike accept that catastrophe losses are rising and that to ensure the viability of insurers, which is vital to any economy, the price of property, business interruption, and contract works insurance must increase and stay at higher levels than in the past.
In New Zealand, the requirement is no longer to hold capital to cover a 1 in 25o year, but is now capital to cover a 1 in 1,000 year event. While providing for more protection of the community it does put even more pressure on price. The question is, will Australia or other jurisdictions follow New Zealand’s lead?
I appreciate the reasons why governments want more protection. The last thing the New Zealand Government wants is another failure like AMI, the irony is that the quickest way that insurance can be made more affordable is to remove the high level of taxation on the vital product, particularly in Victoria, New South Wales, New Zealand and, in the case of Tasmania, on business insurance.
We all wait to see the Victorian legislation which is now more than 2 months overdue and the outcome of the enquiries being held in New South Wales and New Zealand. I encourage everyone to have their say and to do their bit to get rid of the taxes and make insurance more affordable.