A state parliamentary inquiry exploring options to replace the NSW emergency services levy is a constructive step, the National Insurance Brokers Association says.

“The current NSW ESL model penalises responsible home and business owners who invest in insurance to protect their assets,” CEO Richard Klipin said.

“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 insurance costs for NSW households and more than 30% for businesses, adding pressure to premiums when affordability is already challenging, the association says.

“This inquiry is an opportunity to help develop a model that is fairer, simpler and supports increased insurance participation across the community,” Mr Klipin said.

NSW Treasurer Daniel Mookhey announced the inquiry on Sunday and said the government will release a paper with five levy model options, developed after preliminary consultation involving the insurance industry and local councils.

The government said in November 2023 it would remove the ESL, putting the reform back on the agenda after it was dropped by the Berejiklian government in 2017.

It says the inquiry will provide an open forum to test the proposed framework and ensure stakeholder perspectives are considered, and pensioners and vulnerable people will be protected in the reform process.

Business NSW CEO Daniel Hunter says the decision to refer ESL reform to a parliamentary inquiry marks a turning point in the battle against spiralling premiums.

“Businesses want certainty. They want fairness, and they want a system that doesn’t push them out of the insurance market,” he said. “We urge all sides of politics to approach this inquiry constructively and deliver the model NSW businesses deserve.”

NSW is the only mainland state still relying on an insurance-based levy, the business group says. Others moved years ago to a broader property-funded approach.