The NSW Labor Government has announced it is aiming to revamp the state’s Emergency Services Levy (ESL) to create a fairer and more sustainable system.

NSW is the only mainland state that uses a levy on insurance to fund emergency services.

ESL is calculated as a percentage of the insurance premium. The percentage amount fluctuates throughout the year and is approximately 15% for residential property and 26% for commercial property as of December 2023.

Under the current system, policyholders shoulder a significant portion (73.7%) of the total state ESL collection, while local councils and the state government contribute smaller percentages.

The government intends to engage stakeholders and industry through consultations led by the Treasurer on its pathway to determine a suitable solution.

The Insurance Council of Australia (ICA) has applauded this decision, seeing it as a step toward improving insurance affordability in NSW. According to State Budget estimations, the ESL is expected to accumulate $1.3 billion from insurance customers this year and could soar to over $5.1 billion over the forward estimates without reform.

The burden of the ESL has a considerable effect on insurance premiums for consumers, and it will be interesting to see how the proposed reforms unfold and what specific changes will be introduced.