Households in high-risk regions, people on low incomes and small businesses would gain the most from emergency services levy reform, research released by the Insurance Council of Australia shows.

NSW households in disaster-prone areas such as Lismore could save about $565 a year under a property-based alternative, according to a Lateral Economics report accompanying ICA’s submission to a state parliamentary inquiry.

SMEs would enjoy the largest savings, with examples including $105 a year for a small bakery, $8850 for a restaurant and more than $21,000 for a livestock farm. Most other small businesses would save about $300 to $2000, according to the analysis.

The Insurance Council says retaining the ESL on premiums would load rising emergency services costs onto a shrinking base of policyholders at a time when affordable cover is most important.

“No fair tax system should punish households and businesses for protecting their assets, least of all those who can least afford to pay,” CEO Andrew Hall said.

“Reform of this scale takes courage from both sides of politics, and the Insurance Council is committed to working constructively with every parliamentarian to land it.”

Lateral Economics says ESL removal would save the average insured household about $308 a year. After property tax increases, households would be $55 better off.

Reforms would enable 82,000 additional households to take out building insurance and 320,000 more to have contents cover, and would generate annual economic welfare gains of up to $460 million.

The NSW parliamentary inquiry into ESL reform called for submissions on a Treasury options paper by June 19. It is due to report by November 18.

ICA prefers option C – which has additional tiers to smooth outcomes across land values – and suggests further improvements.

Proposed models all change where funds are collected and the amounts paid, in an upheaval to a complex, opaque and generally not well-known system, it notes.

“Given this, we recommend the government, in consultation with the insurance industry, undertake a high-visibility public communication campaign ahead of any changes,” the submission says.

The Strata Community Association, Business NSW and the Financial Rights Legal Centre have supported reform.

“Removing the emergency services levy from home insurance is unfinished business that needs to be resolved to ensure fairer outcomes for consumers and improve insurance affordability, particularly for climate-exposed households,” Financial Rights principal for external relations and advocacy Julia Davis said. “This reform is urgently needed.”

The ICA submission and report are here.

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From the latest Insurance News magazine: Could NSW's latest bid to reform the emergency services levy go down in flames?

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