Time to remove hidden costs of insurance

Zurich Financial Services chief executive David Smith has called on the Government to slash the “punitive” taxes on insurance for small to medium enterprises (SMEs).

Smith said Zurich estimates that tax accounts for 30-40 per cent of insurance premiums for SMEs, and that tax reform in this area is required to decrease premiums, increase insurance levels and relieve the burden for SMEs.

“Loading insurance premiums with punitive government taxes exacerbates the chronic levels of underinsurance across the SME sector,” Smith said.

“Tax reforms, aimed at removing the hidden costs of insurance, would significantly help in reducing non and underinsurance across the SME sector.”

Smith also warned that the insurance industry risks suffering from trust and reputational issues that may have been exacerbated by the exclusion of insurers from the Government’s bank guarantee. Smith said recent research has shown almost half of Australia’s population believes insurance companies may fail in the current market collapse.

Speaking in Sydney yesterday, he said general insurers have been “let down” by the Government’s failure to reassure consumers in the same way it has with banks through the guarantee, and the effect could also impact the life insurance industry.

The Government has provided no help for the insurance industry, with investors now rushing to cash, Smith said, adding “short-termism is back”.

There have been consumer fears for the stability of life companies, and not extending the guarantee wasn’t fair, Smith said.

On other matters, Smith said the insurance industry should put its risk management skills to use on climate change issues to assist in this space and improve the reputation of the industry.