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Monitor seeks views on ESL collection 'nightmare'

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NSW Emergency Services Levy (ESL) Monitor Allan Fels has launched consultation with “key stakeholders” on the way the controversial levy is calculated and collected.

Professor Fels has published a discussion paper on the issue, but his office declined to give insuranceNEWS.com.au a copy because “it is not a public document”.

The way the levy is calculated came under fire last month after a note from Revenue NSW – which incorrectly implied insurers had been over-collecting – caused industry panic.

Insurers have to estimate their share of liability and then collect that amount over the course of the year, and the Insurance Council of Australia says the complexity and uncertainty of this process is a “longstanding concern”.

The National Insurance Brokers Association (NIBA) says it is also an important issue for brokers placing cover with overseas insurers, as they are required to collect the levy on the policyholder’s behalf.

NIBA CEO Dallas Booth told insuranceNEWS.com.au there are “huge difficulties” with setting and collecting the levy.

“It is virtually impossible for an insurance company or broker placing business overseas to collect the correct amount,” he said.

“It’s a procedural nightmare and all the while you have a monitor looking over your shoulder willing to go public. The only real solution is wholesale reform.”

The NSW Government’s half-yearly budget review forecasts ESL revenue of $1.14 billion for the 2020/21 financial year.

“That’s a 45% increase coming at us,” Mr Booth said.

“It has to be a massive incentive for people to opt out of traditional insurance, and every time someone switches to some other process the burden increases on the remaining policyholders.”

insuranceNEWS.com.au understands that after considering submissions, the Monitor will present a report to the NSW Government early in the new year.

The ESL was due to be replaced with a broad-based property levy in 2017, but the state Government abandoned the reform at the last minute, costing the insurance industry an estimated $40 million incurred in altering its systems twice.

insuranceNEWS.com.au revealed in October that the Monitor’s office had cost taxpayers almost $11 million since it was established in 2016, and the publication of its quarterly reports has been repeatedly delayed.