The Insurance Council of Australia (ICA) has welcomed the New South Wales Government’s announcement of a Parliamentary inquiry into reforming the Emergency Services Levy (ESL), describing it as a crucial step towards a fairer and more sustainable system.
The ESL, which contributes significantly to the cost of insurance premiums, raises approximately $1.3 billion from New South Wales policyholders in 2024–25. After extreme weather risk, taxation through the ESL represents the second-largest component of insurance premiums, disproportionately affecting households in high-risk areas.
Under the current system, the ESL is calculated as a percentage of insurance premiums, meaning households with more expensive policies—often those in regions prone to flooding or bushfires—pay substantially more. Alarmingly, many of these households are among the least able to bear the financial burden:
Approximately 70 per cent of households in areas exposed to the highest flood risk have median incomes below the national average.
Around 35 per cent of these households live in areas where median incomes fall below the poverty line.
The Parliamentary inquiry, announced by Treasurer Daniel Mookhey, provides a significant opportunity for reform that could deliver a fairer distribution of costs across all residents of New South Wales, recognising that emergency services benefit the entire community, not only those with insured property.
Andrew Hall, CEO of the ICA, emphasised the importance of the initiative:
“The announcement today by Treasurer Daniel Mookhey is an important next step toward fairer emergency services funding in New South Wales. The current system has repeatedly been found by multiple independent reviews to be unfair and unsustainable. We’re committed to working with the Government and Parliament to develop a model that improves affordability while sustainably funding emergency services.”
The ICA has expressed its intention to engage constructively in the inquiry, advocating for a model that balances equity and sustainability. Experts suggest that reforming the ESL could relieve pressure on vulnerable households while ensuring reliable funding for fire and rescue services, essential in a state frequently impacted by bushfires, floods, and storms.
For context, the current financial impact of the ESL on households can be summarised as follows:
| Category | Approx. Households | Median Income Relative to National Average | ESL Burden |
|---|---|---|---|
| High flood risk areas | 70% of at-risk households | Below national average | Disproportionately high |
| Extreme poverty zones | 35% of at-risk households | Below poverty line | High and unsustainable |
| Other areas | Remaining households | Above national average | Lower ESL relative to income |
The inquiry represents an opportunity to develop a bipartisan approach to funding emergency services, ensuring that contributions are shared fairly across the population while maintaining effective services for all communities.