The Insurance Council of Australia (ICA) has responded to all five Productivity Commission interim reports with recommendations to boost economic efficiency.
ICA has, however, said that the proposed Net Cash Flow Tax (NCFT) could hurt productivity and increase costs for insurance customers. In a media release the ICA said that the NCFT would be unworkable for insurers, whose profits naturally rise and fall with disaster cycles. When major floods, fires or storms hit, insurers pay out massive claims and profits drop and in quieter years they rebuild their reserves to pay future claims.
In its submission, the Insurance Council says that instead of this new tax, the Government should fix the broader problems in Australia's tax system. This includes encouraging state governments to scrap wasteful taxes like stamp duties on insurance and New South Wales's Emergency Services Levy, which can add up to 30% to insurance costs on top of GST.
As the financial safety net for households and businesses across Australia, the insurance industry is uniquely positioned to comment on reforms that address the mounting pressure from climate change, technological disruption, and global economic uncertainty.
ICA deputy CEO Kylie Macfarlane said, “As the industry that provides financial protection when things go wrong, we see firsthand how red tape, skills shortages, and poor climate planning slow down economic recovery and create the biggest barriers to productivity.
“The numbers speak for themselves - natural disasters have cost A$34bn in insurance claims since 2010, mental health issues keep workers off the job for 30 weeks compared to just six weeks for physical injuries, and regulatory burden wastes A$68bn in productivity. This level of waste demands coordinated action.”