Calls to Scrap NSW Emergency Services Levy as Insurance Costs Keep Rising

A pensioner from regional New South Wales named Hans recently received his yearly home insurance bill — and it had jumped by nearly $1,000. The total came to $3,590, and about $1,000 of that was made up of government taxes and fees. Hans says the system is unfair, and many others across the state agree. A NSW parliamentary inquiry is now looking at ways to lower insurance costs and change how emergency services are funded.

Hans, who only wanted to use his first name to protect his privacy, had his home affected by Cyclone Alfred last year. To try to lower his bill, his only real choice was to raise his excess — the amount he pays himself before insurance kicks in — from $600 to $2,000. That is a very large amount for someone on a pension. He says the taxes added to his bill need to be reviewed. 'Insurance is sort of treated as a lucrative revenue-raising source and that annoys me because it's not something that you can choose to have or not have,' he said.

One of the main taxes on Hans's bill is called the Emergency Services Levy, or ESL. This is a charge that insurance companies in NSW must pay, and they pass the cost on to their customers. Hans's ESL jumped from $273 to $362 in just one year. NSW is the only state or territory in Australia that funds its fire and emergency services this way, while all other states use different funding models.

The ESL has gone up by 54 per cent over the past six years, according to the Insurance Council of Australia. Each year, the ESL raises about $1.4 billion for the government, covering around three-quarters of NSW's emergency services budget. The council says the levy adds up to 18 per cent to household insurance premiums and up to 34 per cent to business premiums, before other taxes like GST and stamp duty are added. This means insured people end up paying much more than they would under a fairer system.

A large group of industry organisations is calling on the NSW government to scrap the ESL before the March 2027 state election. The group includes the Insurance Council of Australia and several other bodies that work in housing, finance, and community services. NSW Premier Chris Minns has already promised since 2023 to remove the ESL and replace it with a simpler levy spread across all properties. A parliamentary inquiry is currently underway to work out the best way to do this.

Modelling done for the Insurance Council found that more than two million NSW households would be better off if the ESL were replaced with a property levy. The average insured household would save about $308 a year on insurance and still be around $55 better off overall, even after paying the new levy. Families in disaster-prone regional areas would benefit the most, saving about $565 per year. Small businesses could also save, from around $105 for a bakery to more than $21,000 for a small livestock farm.

Climate change is also pushing insurance prices higher, with premiums already rising by more than 50 per cent due to extreme weather events. Customer-owned banks, along with climate and finance experts, are working together to help communities prepare for future disasters. Their goal is to give regional towns the skills and tools they need to plan ahead and recover faster. One key idea is for banks to offer 'green loans' that help homeowners install solar panels and batteries to make their homes stronger and more efficient.

Across Australia, the number of uninsured homes is growing fast. In 2022, about 10 per cent of households were struggling to afford insurance, and by 2024 that number had risen to 15 per cent. The financial regulator now estimates that one in seven Australian homes is currently uninsured, and that figure could rise to one in four by 2050. Researcher Peter Kamstra from the University of Melbourne says homeowners need better financial incentives to make their homes safer, and that the system for telling people about risks needs to become much simpler and clearer.