The Financial Services Council has called for tax incentives for life insurance and is set to release figures showing the potential savings the federal government could make by implementing them.
The FSC recommends the federal government consider the “stick approach”, in which people of certain incomes would be encouraged to take out life insurance and be penalised by having to pay more tax if they did not, FSC chief executive John Brogden said.
“There is a capacity for private insurance to offset the cost of public funding for disabilities not dissimilar to the way private health insurance offsets the cost of public health funding,” Mr Brogden said.
“Of course, we realise there are not just tax benefits but massive subsidies that are also delivered with the health insurance benefit scheme, and we don’t want to go down that path at all,” he said.
Mr Brogden said the FSC is currently reviewing the numbers and what they show will form part of the council’s submission to the Murray Inquiry.
“If it costs the government X to provide a tax benefit for people buying life insurance, what is the Y - what does it save them?” he said.
“We are doing that work now and will have those findings in a couple of months.”
Mr Brogden’s comments complemented yesterday’s release of the FSC and Metlife life insurance report Apathy to Action: Understanding consumer barriers to adequacy in life insurance in Australia.
The report found consumers would be most motivated to purchase life insurance if the government provided a tax incentive or disincentive similar to the current private health insurance arrangements.
“This would increase the uptake of life insurance and replace the need for public expenditure in the long term,” Mr Brogden said.
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