Removal of Emergency Services Levy (ESL) to Reduce Insurance Premiums

Posted: March 21, 2024Categories: ,

We are pleased to share significant developments regarding reforms to the Emergency Services Levy (ESL) in New South Wales, which are poised to result in a reduction in insurance premiums.

The NSW Emergency Services Levy serves as a critical funding source for essential emergency services agencies in the state, including the Rural Fire Services (RFS), Fire and Rescue New South Wales (FRNSW), and the State Emergency Service (SES). However, the method of collecting ESL through insurance premiums has long been a contentious issue due to its impact on affordability.

Notably, NSW remains the only mainland state relying on an insurance tax to finance its emergency services. ESL rates within insurance premiums currently range from 13% to 16% for residential properties and 22% to 30% for commercial properties.

This disparity in state taxes on insurance compared to other regions, particularly Victoria, is considerable, leading to an estimated 13% of households in NSW being uninsured—double the rate in Victoria. The lower levels of insurance coverage not only weaken the state’s capacity to recover from extreme weather events but also increase the burden on recovery services and government relief efforts.

Recent reports from the Actuaries Institute have highlighted alarming trends in insurance costs, with individuals in high-risk areas experiencing average increases of over 50% in premiums. Approximately 250,000 people face ‘insurance stress,’ where insurance expenses exceed the equivalent of four weeks’ rent.

In response to longstanding advocacy efforts from groups such as the Insurance Council Australia and Strata Community Australia, Premier Chris Minns announced significant reforms to the ESL on November 16. The decision to abolish the ESL on insurance is expected to result in substantial cost reductions, potentially lowering home insurance premiums by up to 15% and business insurance premiums by around 23%.

This reform aligns with successful actions taken by other mainland states that have removed similar levies, with Tasmania currently reforming its levy structure to focus solely on commercial insurance.

The reform of the ESL represents a significant win for insurance affordability in New South Wales.

As your trusted partner, Wellman Strata remains committed to keeping you informed about the potential impact of these reforms on your insurance premiums and strata levies once they come into effect.