Life insurers and industry body IFSA are putting their support behind a proposed state legislation to abolish stamp duty and other similar type taxes on life insurance products which, if passed, could reduce the cost of premiums by up to 12 per cent.
Yesterday industry body IFSA, which represents members with $1.3 trillion in assets, is backing a bill proposed by Queensland's shadow treasurer, Bruce Flegg, to demolish stamp duty on life insurance products.
Richard Gilbert, IFSA chief executive, says this is the first time a parliamentarian in any state or territory has acted to address this issue. "Certainly, we believe that Dr Flegg's bill should be supported and the time has now come for each of state and territory parliaments to draw up a timetable for the abolition of state taxes on these products so that life insurance is more affordable," Gilbert said.
"The Shadow Treasurer's bill is essentially unfinished business given that State nuisance taxes and stamp duties were always intended to be progressively phased out after the passage of the Federal GST/New Tax System legislation."
Clive Levinthal, CommInsure general manager of product, believes the proposed changes could save tens of millions. "The stamp duty rates can amount to up to 11 or 12 per cent across the various states and if they abolish the duty, life insurers will be reducing their premiums by virtually that same amount in many cases," Levinthal said.
He went onto say that"[Our research] shows there is usually a proportional take up in terms of customer buying when premiums do go down generally, so we would expect to see as much if not a bigger percentage increase in the size of the industry."
In 2002, John O'Shaughnessy, IFSA deputy chief executive, said that life insurers paid more than $24 million in the way of this stamp duty, a value that could possibly treble this year. "We haven't done estimates for 2008 but you would be safe to say it would be $50-70 million a year on a national basis."
Andrew McKee, head of life risk Zurich Australia, said one of the main issues with stamp duty charged on life insurance is it varies in each state. "Abolishing stamp duty in one state or across all the states would provide a more consistent stamp duty regime but also make insurance more affordable," he said.