The ACT has confirmed the second round of reductions in general insurance rates following the announcement in last year’s budget of a 5 year plan to abolish duty on insurance premiums. Duty on general insurance premiums was reduced from 10 percent to 8 percent on 1 October 2012 and from 1 July 2013, the rate will further reduce from 8 percent to 6 percent.
In contrast, Queensland has announced that general insurance rates will increase from 1 August 2013. From that date, all classes of general insurance (other than comprehensive third party) will attract duty at the rate of 9 percent of premiums instead of 7.5 percent for class 1 insurance (most business insurance) and 5 percent for class 2 insurance (professional indemnity, motor vehicle). This represents increases of 20 percent and 80 percent for class 1 and class 2 insurance respectively. The increased rates will only apply where the insurance contract is entered into on or after 1 August 2013 and the premium is paid on or after 1 August 2013.
Insurers will need to take into account the different commencement dates for the rate changes and make alterations to their computer systems and administrative processes to ensure that duty is calculated and remitted correctly and passed on to the insured at the correct rate. In the case of the Queensland increases, getting the rates wrong may be a cost to the insurer.