The Insurance Council of Australia (ICA) has rejected claims that reforming the funding of emergency services in NSW will “boost the profits of big insurance companies” at the expense of families.

The claim was made by the NSW Fire Brigade Employees’ Union (FBEU), which has launched an advertising campaign opposing the proposed funding reforms.

NSW emergency services are currently 75% funded by an emergency services levy (ESL) on home and contents insurance policies, but the state government is consulting on plans to fund them through council rates instead.

ICA CEO Rob Whelan says the ESL is an “unfair, inefficient and inequitable” tax on householders who have taken out insurance, subsidising about 810,000 households that do not have building or contents cover.

But NSW FBEU State Secretary Jim Casey says if the change is adopted it will give insurance companies up to $700 million in extra profits.

Mr Whelan says the current system does not benefit insurers. “In fact, the additional cost is a disincentive for households to purchase insurance.

“The removal of the ESL on insurance premiums will lead to significantly cheaper home and contents policies in NSW,” he said.

The union argues the current system is truly “user pays” because insurance companies are the main beneficiaries of a strong fire service, which “saves them billions in insurance claims”.

With Victoria moving to a property-based funding model for its fire services, NSW and Tasmania are the only states to retain a levy on home insurance.

NSW Treasurer Mike Baird says nothing has been decided, with responses to the Funding Our Emergency Services discussion paper due by next Monday.