Insurers in NSW face fines of up to $10 million if caught engaging in “unreasonable pricing” under the state’s new property-based charge for funding fire and emergency services.

The State Government says insurers are expected to pass on savings to consumers when the reform is implemented from July 1 next year.

Emergency Services Levy Insurance Monitor Allan Fels and his deputy David Cousins will police the industry for pricing misconduct.

“Professors Fels and Cousins will be our ‘cops on the beat’ to ensure savings are passed on to households as the Government undertakes this important reform,” Treasurer Gladys Berejiklian said.

The Government says the new levy, paid alongside council rates, will reduce high levels of underinsurance and more fairly spread the burden of funding emergency services.

The current emergency services levy on insurance is estimated to make residential policies 20% more expensive and commercial policies 40% more costly.

Property owners are expected to be on average $40 a year better off under the new system.

“It is absolutely imperative that insurance companies do the right thing and pass on the tax reductions in full,” Professor Fels said. “The aim is to totally eliminate the burden of the current tax on consumers and businesses.”

About 36% of NSW households have no contents cover, which critics says is exacerbated by the current levy, imposed only on customers who take out property insurance.