The insurance industry has reacted angrily to the NSW Government’s imposition of a new $39 million levy on insurance policies to fund the State Emergency Service (SES).

The levy, announced in the state’s mini-budget by State Treasurer Eric Roozendahl last week, mirrors the controversial fire services levy (FSL) which industry associations have been lobbying to have removed.

Insurance Council of Australia CEO Kerrie Kelly says the new levy – which will come into effect on July 1 next year – is “another unnecessary, inefficient and ill-conceived tax to be paid by general insurance policyholders”.

“In a classic case of cost-shifting, the NSW Government has handed down a budget whereby the cost of running the SES will be picked up by general insurance consumers at an additional estimated cost of $10 per policyholder.”

NIBA CEO Noel Pettersen says the new levy ignores the recommendations of the recent NSW Independent Pricing and Regulatory Tribunal (IPART) report into state taxation, which found the FSL is highly inefficient and creates disincentives to properly insure. The report said the removal of the FSL “should be a priority”.

“The NSW Government’s response has been to add yet another tax on top of the three already added to every premium, this time to fund the SES,” he said.

“Policyholders in NSW already pay world record-level insurance taxes of up to 40 cents in the dollar for their homes and 60 cents in the dollar for their businesses.

“If you don’t insure, you don’t pay for the upkeep of the emergency services and you won’t have to pay this tax,” he said. “There is no way the state can justify this discriminatory tax that will further tempt people to risk their future and underinsure or not insure at all.”

NSW Emergency Services Minister Tony Kelly said in a statement that the new arrangement will provide an estimated $39 million in the first year, “reducing
the direct burden on the State Budget”.

The local government’s contribution to emergency services 
funding has been reduced to 11.7% and the Government contribution increased to 14.6%.

Mr Kelly says the insurance industry is required to contribute towards the cost of the fire brigades “in recognition of the significant savings in claims on the industry
 each year from properties being saved by our fire fighters from destruction by fire”.

“Until now, the SES has not been part of this system, despite the insurance industry and the community benefiting from the work of volunteers to help people suffering from damage of storms and floods,” he said.

Also see ANALYSIS.