The move to a property-based emergency services funding regime on July 1 will end an “unfair and illogical” system that has penalised NSW property insurance policyholders, the Insurance Council of Australia (ICA) says.

The state currently funds its fire and emergency services through a levy on residential and commercial property cover.

Abolishing the emergency services levy (ESL) is intended to save fully insured households an average of $47 each year, and address underinsurance in NSW. From July 1 the fire and emergency services levy (FESL), paid alongside council rates, will replace the ESL.

“The switch from an impost on insurance to a property levy will bring an end to an unfair and illogical system whereby only those who protect their assets with insurance fund these vital community services,” ICA CEO Rob Whelan said.

“Switching to the FESL will make insurance more affordable and should help to reduce the incidence of non-insurance and underinsurance in the community. Further, the move to a more efficient property levy is forecast to produce benefits for the NSW economy.”

The NSW Parliament will consider legislating the FESL bill in coming weeks.

“This legislation ushers in an important reform – a fairer system where all property owners make a contribution, while also bringing down the cost of insurance,” Treasurer Dominic Perrottet said.