A NSW parliamentary inquiry will consider options for replacing the emergency services levy on insurance, building on consultations since the plan was announced more than two years ago.

The government will release a paper setting out five alternative funding options developed following collection of property-level insurance policy data and local council land classifications.

Treasurer Daniel Mookhey says the inquiry will provide an open forum to test the proposed framework and ensure consideration of various perspectives.

“This is an important step in moving funding for emergency services to an equitable and sustainable footing that cuts the cost of insurance,” he said yesterday.

“We want to work with the opposition and the crossbench to plot the last leg of this journey. This system funds services that protect all of us – and it is time for all politicians to work together to reform it.”

Mr Mookhey says the government is committed to protecting pensioners and vulnerable community members, and ensuring a revenue-neutral model for sustainably funding emergency services.

Premier Chris Minns announced the ESL removal in November 2023, putting the reform back on the agenda after the Berejiklian government backflipped in 2017 when its proposal met business and property owner opposition.

The government released a consultation paper in April 2024 and has appointed the Independent Pricing and Regulatory Tribunal as ESL monitor.

Insurance Council of Australia CEO Andrew Hall says Mr Mookhey’s inquiry announcement is an important development.

“The current system has repeatedly been found by multiple independent reviews to be unfair and unsustainable,” he said.

“We’re committed to working with the government and parliament to develop a model that improves affordability while sustainably funding emergency services.”

ICA says taxation is the second-biggest component of premiums after extreme weather risk, and NSW collected $1.3 billion from insurance customers through the ESL last fiscal year.

Households with the greatest risk are hit hardest by the levy, calculated in proportion to premium costs, and those policyholders often have the least capacity to pay more, it says.

About 70% of households exposed to the highest flood risk are in areas where the median income is below the national average, and about 35% of those households are in areas where median income is below the poverty line.