Insurers and brokers have again called on the NSW Government to scrap the Emergency Services Levy (ESL), describing the reform as critical to post-disaster recovery and rebuilding efforts.

They say in separate submissions to the NSW Independent Bushfire Inquiry that the “inequitable” levy discourages residents and businesses from taking up insurance, which comes with dire consequences when disasters strike.

“The role of insurance companies in this system is to act as tax collectors for the NSW Government,” the Insurance Council of Australia (ICA) says in its submission.

“This is not a new situation and it is well understood that the higher rates of non-insurance and under-insurance of buildings and contents in NSW is, in large part, an outcome of how NSW has chosen to fund its emergency services.”

The bushfire catastrophe last summer will be no different, with many expected to find it difficult to recover financially as they are either under-insured or have no insurance at all, ICA says.

It has engaged an expert to analyse claims data from the bushfires to determine the extent of under-insurance among affected policyholders. The analysis is yet to be completed.

ICA’s submission urges the NSW Government to replace the ESL with a broad property-based levy, similar to the model introduced by Victoria after the 2009 Black Saturday bushfires.

A property-based levy was supposed to be introduced in NSW in July 2017, but the State Government abruptly called it off a month before its implementation.

The cost of buying insurance in NSW is about 21% higher on average than the rest of Australia because of the ESL. The layering of insurance duty and GST can result in taxes adding more than 50% to the base premium for an insurance policy.

“[ICA] considers it important that individuals and businesses in disaster-affected zones not be deterred from adequately insuring their buildings and contents,” the submission says. “It is important that emergency services be sustainably and equitably funded in the future.”

The National Insurance Brokers Association (NIBA) has also urged the Government to reconsider its position, describing the current arrangement as one that “cannot be allowed to continue”.

“In these increasingly uncertain times, property owners must be encouraged and supported to adequately insure their risks,” NIBA says in its submission.

“It is the Government’s responsibility to ensure that barriers that impede responsible property ownership, such as the ESL, are removed, especially as the Australian public becomes more price-sensitive.”