The bind created by rampart regulation has been neatly demonstrated by ASIC’s double standard yesterday in trying to blame insurance companies for most people being under-insured – as The Australian reports.

On one hand ASIC is trying to blame the insurers for not selling punters more insurance, but on the other it makes selling more insurance much harder by the level of licensing and disclosure required. And then there are the main villains: the Victorian and NSW governments.

Once upon a time when you rang your average insurance company to pay the annual house and contents premium, the person on the other end of the line would question whether you had enough coverage given building costs inflation and suggest you increase the amount. The regulators (egged on by consumerists) saw this as uninformed marketing.

Then along came financial services reform and the ridiculous regulations that have resulted in 100-page product disclosure statements that consumers never bother to read anyway. Suddenly the call centre worker simply wasn’t allowed to offer “advice” on increasing insurance cover unless that worker had been trained and licensed to do so.

Most insurance companies simply found that too hard and costly, particularly given turnover rates in the average call centre. No more advice when you go to pay your premiums.

So now the regulator is blaming the insurers for not selling enough insurance. They can’t win. Whatever you might think of insurance companies, they are not entirely stupid. They know they make more money by selling more insurance – I wonder if ASIC has heard of the profit motive?

Of course insurance companies make more politically popular targets than State Governments.

Even a state Labor treasurer’s knowledge of economics might possibly run to the concept of higher prices reducing demand. All governments see insurance policies as a source of revenue with New South Wales and Victoria by far the worst offenders. More than half of some premiums in those states consist of various government taxes, fees and levies.

Perhaps the most stunningly iniquitous tax of all is the fire services levy, whereby only householders and businesses with insurance policies pay firemen’s wages. The Insurance Council has been campaigning against this nonsense for years without making any headway in the two most populous states where policy is getting worse instead of better.

This from a recent ICA release against Victoria’s latest move to extend its take from property insurance:

“Businesses in Victoria already pay up to 82.5% tax on their insurance premiums, identified as the highest insurance tax rates in the world by a recent report by the Centre for International Economics.* This compares with taxes of 22% in South Australia, 21% in Western Australia and 18% in Queensland, all states with which Victoria competes for business investment. Victoria’s punitive tax rates would increase even further under the proposed legislation.”

You’ll notice New South Wales is missing from the above comparison because it’s just as bad. New South Wales this month increased its general insurance stamp duty rate on household, commercial travel and mortgage insurance from 5 per cent to 9 per cent and it similarly abuses policy holders with a fire services levy.

If only the Insurance Council had the political power in those states of, say, the hotels and property developers.

Michael Pascoe is associate editor of Eureka Report.