Insurers’ claims of profit erosion will be rigorously monitored as NSW prepares to switch to a property-based emergency services funding regime by next July 1, authorities warn.

Emergency Services Levy (ESL) Insurance Monitor Allan Fels has again cautioned the industry against using the changes as “an opportunity for significant increases in base premiums”.

“We will be subjecting the industry’s claims about premium rises to close scrutiny,” he said.

“The industry argues that increases in average claim size lead to rising premium costs… But there are other factors such as claim frequency and reinsurance that can have a positive or negative impact on the net cost per policy, and these will be carefully monitored.”

The Insurance Council of Australia says its members are working with authorities to ensure the new funding scheme’s success.

“Insurers remain committed to passing on to their customers the full savings that flow from abolishing the [ESL], just as they did three years ago when Victoria removed its equivalent [levy],” spokesman Campbell Fuller told insuranceNEWS.com.au.

NSW Treasurer Gladys Berejiklian says the new property levy, paid alongside council rates, will reduce the state’s high levels of underinsurance and more fairly spread the burden of funding fire and emergency services.

The current levy is collected via insurance policies.