INSURERS and industry analysts have warned Victoria's crippling 84 per cent fire services levy on property premiums is forcing farmers and regional businesses to underinsure.
"There are clear signs these crippling taxes are forcing people out of insurance," said former Insurance Council of Australia southern manager Peter Jamvold.
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"Anecdotal evidence from insurers is that businesses in the bush are reducing sums insured and, in some cases, even not renewing their policies."
"If the total premium pool gets smaller, then FSL (fire services levy) rates have to increase to make up the shortfall.
"As FSL rates increase, the premium pool gets smaller.
"And so the destructive spiral continues."
Regional Victorian businesses and farmers are being slugged with a fire services levy of 84 per cent on their property insurance, plus GST and a 10 per cent State Government stamp duty on the combined amount.
For each $1000 of premium that country businesses and farmers pay to their insurers, they must also pay a terrorism tax of $20, the fire services levy of $857, GST of $188 and stamp duty of $206, bringing the total to $2271.
The Victorian Farmers Federation says it has substantial anecdotal evidence from members stating the FSL and other taxes are major disincentives to fully insure.
In a submission to the 2009 Victorian Bushfires Royal Commission's review of the FSL, a VFF member said: "I have deleted the woolshed and the piggery buildings from insurance cover to save the cost of the premium.
"If they burn down, I'll just have to hope for State Government support to rebuild them."
The VFF says it makes more sense to replace the FSL with a property and vehicle charge to ensure that all who are potential benefactors contribute to funding the fire services.
Elders and Wesfarmers brokers confirmed some clients were increasing their excess to counter the increases or underinsuring some assets.
One Elders agent said he had clients who were simply cutting back on insuring assets such as fencing and not raising insurance levels on assets, which had significantly risen in value.
Wesfarmers Federation Insurance manager Barry Park said regional business and farmers were feeling the pain and demanding to know why they were facing such steep increases in their insurance bills.
"Certainly we're being questioned (by clients) about the increases," Mr Park said.
