Property insurance policyholders may experience “bill shock” next year after the NSW Government dropped plans to remove the emergency services levy (ESL), the National Insurance Brokers Association (NIBA) says.

Nearly all insurers had removed the levy on premiums by April, before the planned switch to a rates-based collection system on July 1, meaning customers who took out or renewed policies in April, May and June paid little or no ESL.

NIBA says home policy payments for such customers will likely jump 18-24% next year due to reinstatement of the ESL, while commercial premiums will be 35-40% higher.

“This bill shock will occur at a time when insurance premiums are increasing across the board because of losses sustained in property insurance markets in recent years,” it says in a submission to a NSW parliamentary committee inquiry.

The committee is examining the levy and funding alternatives after the proposed change was put on hold due to concerns over unintended consequences for businesses.

“It is essential that fire and emergency services are adequately funded,” committee chairman Robert Borsak said at the start of the inquiry in July. “However, any system must be fair and in the best interests of the community, our emergency services and other stakeholders.

“At the conclusion of this inquiry, the committee hopes to make sound recommendations for the best way forward.”

NIBA says funding models in Victoria and WA provide “clear and successful” precedents for introduction of a property-based charge. “Despite numerous requests, NIBA is not aware of the nature of the unintended consequences, nor the extent to which the new property levy would have operated in an unreasonable or unfair manner.”