The Insurance Council of Australia has responded to all five Productivity Commission interim reports with recommendations to boost economic efficiency while warning against the proposed Net Cash Flow Tax (NCFT) that could hurt productivity and increase costs for insurance customers.
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 per cent 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.
Summary of the Insurance Council submissions:
- Pillar One (Creating a More Dynamic and Resilient Economy): Reduce the overall corporate tax rate for all businesses, encourage states to remove inefficient insurance taxes, and better coordinate government regulation through the Council of Financial Regulators.
- Pillar Two (Investing in cheaper, cleaner energy and the net zero transformation): Natural disasters have cost $34 billion in insurance claims since 2010, with costs jumping 67 per cent in recent years. Create a national database of climate risks, consistent home resilience ratings, and a $30.15 billion fund to strengthen flood defences.
- Pillar Three (Harnessing data and digital transformation): Leverage existing legal frameworks to regulate artificial intelligence rather than creating new rules, streamline data access pathways and deliver outcomes-based privacy regulation.
- Pillar Four (Building a skilled and adaptable workforce): Make it easier to recognise skills from previous jobs and remove unnecessary licensing barriers, which could reduce recruitment timeframes from six months to weeks while improving labour mobility during disaster recovery.
- Pillar Five (Delivering quality care more efficiently): Support a National Prevention Investment Framework prioritising mental health prevention and early intervention to reduce healthcare costs, workplace absenteeism, and insurance claims.
These recommendations work together to eliminate waste, make better use of resources, and build Australia's resilience against economic shocks that currently cost billions in lost productivity.
