The Insurance Council of Australia (ICA) has welcomed concerns raised by the NSW Emergency Services Levy (ESL) Monitor over the tax on insurance and its impact on the community.

As reported by insuranceNEWS.com.au last week, Monitor Allan Fels and his deputy David Cousins make clear in a submission to the bushfires royal commission that they have serious doubts about whether the levy should continue.

“The Insurance Council and insurers are pleased that their concerns about the unfair and inequitable nature of the ESL and its detrimental impact on NSW small businesses and householders has been reflected in the ESL Monitor’s comments to the royal commission,” ICA spokesman Campbell Fuller said today.

“We hope the Monitor’s comments will be heard by the Government and Treasury.”

Insurers have campaigned for more than a decade for the levy’s removal, arguing that it is inefficient and exacerbates underinsurance. They were left blinsdided when the NSW Government abruptly abandoned plans in 2017 to replace it with a fairer property-based tax.

The Monitor’s submission warns that increases to the levy will worsen underinsurance in the state, and that Victoria, which abolished a similar levy not long after the Black Saturday fires of 2009, is in a much stronger position.

“If increasing funding requirements leads to more people being under- or non-insured, this can undermine the robustness of the funding,” the submission says.

“Numerous reports have suggested the current funding system is deficient, particularly around key issues such as fairness, affordability, and transparency.”

The submission notes that Victoria, which now has “a more stable and efficient” process, has consistently been able to maintain a higher level of funding despite having a smaller population.

The Monitor’s submission says the NSW levy has risen by 45% from 2018/19 to 2020/21.

“Further increases in ESL are likely to see more policyholders reduce or eliminate their cover, as consumers are more sensitive to price increases than price decreases,” the submission says.

“This means that over time, the burden of the ESL must be shared amongst a shrinking population base, further exacerbating the problem.”

The Monitor’s office will close on June 30.