NIBA welcomes the announcement of NSW ESL reform

Last week, the NSW Government announced its intent to reform the Emergency Services Levy (ESL) in favour of a fairer and more sustainable emergency services funding model. 

NIBA has long been a vocal advocate for ESL reform, recognising that the current model disproportionately penalises responsible property owners and places an unfair burden on those who take proactive steps to protect their homes and businesses, undermining the principle of shared responsibility in community safety. 

NIBA CEO Phil Kewin said, “The announcement to reform the Emergency Services Levy is a positive move towards creating a fairer and more equitable system for all. The current ESL model penalises responsible home and business owners who invest in insurance to protect their assets. NIBA has consistently highlighted the need to rectify this imbalance and create a system that incentivises responsible risk management practices and increases insurance affordability."   

The ESL accounts for about 18% of the cost of insurance for households in NSW, and up to about 30% for businesses. The reform will replace the existing insurance-based levy with a “state-wide contribution” model. It is not yet known what form this model will take or how the government intends to collect the funds required to maintain the state fire and emergency services. 

This year, the Actuaries Institute estimated that insurance costs went up by more than 50% on average for people in high-risk areas. The Institute also found that about 250,000 people experienced ‘insurance stress’, meaning the cost of insurance was higher than four weeks rent. 

The Hon Stephen Jones, Assistant Treasurer and Minister for Financial Services, welcomed the move.  

“It is great to see this announcement from Premier Minns today. The removal of the ESL from insurance policies is an excellent decision and a long overdue reform. It will come as a huge relief for households and businesses in NSW feeling the crunch of cost-of-living pressures.” 

The Insurance Council of Australia (ICA) also congratulated the NSW Government for its decision to reform the ESL.  

According to the ICA, abolition of the ESL on insurance will see the cost of home cover up to 15% lower on average, while for business cover, the figure will be around 23% lower. 

State Budget Papers estimate that insurance customers will pay $1.3 billion through the ESL this year and, without reform, would pay more than $5.1 billion over the forward estimates. 

“Reforming the ESL will be a major win for insurance affordability in New South Wales, an issue that is being discussed around kitchen tables and in small businesses around the state,” said Andrew Hall, CEO, ICA.  

Business NSW – the state’s peak business organisation representing almost 50,000 businesses – has also welcomed proposed ESL changes.  

“There are thousands of mum and dad businesses that are one disaster away from shutting their doors permanently – all because they simply can’t afford insurance,” Business NSW CEO Daniel Hunter said. 

“Businesses receiving insurance payouts are often obliged to rebuild their assets with the same inherent vulnerabilities as before the claim, in many cases leaving them yet again susceptible to the natural disaster that caused the original damage.”  

The NSW Government says it will begin a consultation process with industry and stakeholders on the best options for NSW to move towards a better, more sustainable funding model. 

This reform would bring NSW in line with other mainland states and territories, which fund state fire and emergency services through either a property levy or consolidated revenue. 

NIBA will be engaging with the NSW Treasury on the proposed reforms and will make a formal submission on behalf of members when consultation begins in 2024.