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NSW to appoint insurance monitor in ESL reforms

The NSW Government says it will appoint an insurance monitor to ensure companies don’t keep premiums at elevated levels once the Emergency Services Levy (ESL) is removed under proposed reforms.

Premier Chris Minns said yesterday that the Government will remove the ESL from insurance and apply it instead to property, with Treasurer Daniel Mookhey to lead a consultation with industry and stakeholders on the proposed model.

“There will be an insurance monitor established to ensure that those companies, those insurance companies, do not keep insurance high once the tax has been removed – and heavy penalties will apply to any that do,” Mr Minns said yesterday in delivering a speech in Sydney.

The reforms will be revenue neutral, but until the model has been finalised it’s not possible to provide an exact estimate of benefits for mortgage holders, he says. There will also be protections for pensioners who may not currently pay insurance on their property.

“We’ll learn the mistakes of the previous Government’s attempts at this reform and ensure that we are investigating all potential methods of measuring the value of a property not just the unimproved value of the land,” he said.

The NSW Berejiklian Government backflipped in June 2017 on plans to ditch the levy, just before new arrangements were due to take effect, after a backlash to the alternative proposals by some businesses and other property owners.

The Financial Rights Legal Centre says reforming the ESL is unfinished business from the previous government that needs to be resolved to ensure fairer outcomes for consumers and improve insurance affordability.

“The prior reforms had an effective and well-respected price monitor team in place with Allan Fels and David Cousins at the helm,” Senior Policy and Advocacy Officer Drew MacRae says.

“We would expect either Allan and David be reinstated or a similarly independent and well-respected monitor be established with an appropriately broad remit.”

The Insurance Council of Australia, National Insurance Brokers Association, Business NSW and Strata Community Association are among groups that welcomed the ESL levy reform announcement yesterday.

NSW is the only mainland state that uses a levy on insurance to fund emergency services, and under the existing model policyholders contribute 73.7%, local councils 11.7% and the state government 14.6%. 

The Actuaries Institute says it adds 10-25% to the cost of a household’s insurance premium and falls disproportionately on households who face the highest natural hazards risks and therefore higher premiums.

“Home insurance affordability and availability is an issue of national concern,” CEO Elayne Grace said.

“Underinsured and uninsured households have significantly less capacity to cope with adverse weather events and natural disasters, which reduces the resilience of communities. Abolishing ESL and replacing it with a fairer tax should help improve resilience.”

Local Government NSW says a decision to review the way the ESL is collected is long overdue, but it remains concerned that no mention has been made of decoupling the levy from council rates.

“I hope this was just an oversight and not an indication that council rates will continue to be cannibalised by the levy,” President Darriea Turley said.

The current process costs councils money to collect and the group says it’s not levied on all types of land, including vast landholdings that generate income for the government through state-owned corporations such as Forests NSW.

“Councils have been shouldering the burden of the increased cost of emergency services for too long,” Cr Turley said.

“This has made it incredibly difficult for councils to budget and provide the services ratepayers expect."