Home / Regulatory & Government / 'Unfair': NSW budget ignores ESL
27 June 2022
The NSW budget missed the opportunity to tackle unfair insurance taxes and levies, the Insurance Council of Australia (ICA) says.
ICA wants the Emergency Services Levy (ESL) on insurance products, which adds to affordability issues in the state, scrapped.
A previous attempt to ditch the levy and replace it with a broad-based property tax was abandoned in 2017, and ICA says NSW insurance customers now pay the most expensive premiums in the country. It says the levy adds 30-50% to the cost of premiums.
“No other mainland state taxes insurance customers with the cost of delivering emergency services, and Tasmania is currently in the process of removing its levy,” ICA said.
Budget papers show that NSW insurance customers will pay more than $1 billion in ESL in 2022/23 to fund measures associated with the 2020 NSW Bushfire Inquiry and in response to the 2021 and 2022 floods.
Including council contributions, ESL payments over the forward estimates will be 10% higher, or $520 million more, than forecast at last December’s mid-year review.
“This increase has a direct impact on insurance affordability for policyholders all over the state,” ICA says.
“The Government’s own 2020 Review of Federal Financial Relations chaired by former Telstra CEO David Thodey found that insurance taxes like the ESL ‘drive up premiums and discourage consumers from adequately insuring [with] serious human and social consequences’.”
ICA says it welcomes budget action on renewables and climate change, as well as funding measures previously announced to meet the requirements of the 2020 Bushfire Inquiry.
It previously called for $232 million to be jointly invested by the state and federal governments to better protect NSW homes and communities from extreme weather, which it predicts would deliver a return on investment of $5.6 billion by 2050.
“We support the NSW Government’s positioning as a driver for major reform to the state’s budget, but one of the most inefficient and punitive taxes being levied on insurance customers remains untouched,” ICA CEO Andrew Hall said.
“NSW will soon be the only state to require those who insure to pay for the cost of delivering emergency services.
“This is not only unfair, it also has terrible public policy outcomes that discourages adequate insurance coverage.
“In a state that is recovering from the worst flood and bushfire events in modern history, and with extreme weather events only getting worse not better, we can’t afford not to include insurance levies and taxes in the government’s reform agenda.”