The New South Wales government will advance its planned overhaul of the state’s Emergency Services Levy (ESL) through a parliamentary inquiry, as part of an ongoing reform process with implications for insurers and brokers. Under the current model, most ESL revenue is collected through property insurance policies. The government has stated that the ESL component of residential insurance has risen 48% between 2017–18 and 2023–24, adding to pressure on household budgets during a period of broader affordability concerns.
The Minns Labor Government has committed to removing the levy from insurance and shifting to what it describes as a “simple and transparent” property-based charge applied across the ratepayer base. All other mainland Australian states already use property-based mechanisms to fund emergency services, with NSW the only mainland jurisdiction still relying primarily on insurance-based collections. A parliamentary inquiry will examine options for a replacement model and take evidence from parties and stakeholders. The government plans to release an options paper setting out five possible levy designs, drawing on detailed property-level insurance policy data and land classifications supplied by local councils under recent legislative changes.
Treasurer Daniel Mookhey said the inquiry is intended to test the proposed framework and gather evidence from a range of interests. “This is an important step in moving funding for emergency services to an equitable and sustainable footing that cuts the cost of insurance. The parliamentary inquiry will provide an open and transparent forum to test the proposed framework and ensure stakeholder perspectives are meaningfully considered. We want to work with the Opposition and the crossbench to plot the last leg of this journey. This system funds services that protect all of us – and it is time for all politicians to work together to reform it,” Mookhey said. The government has indicated that any revised model will be designed to be revenue neutral while maintaining funding for emergency services agencies. It has also committed to considering protections for pensioners and other vulnerable groups as part of the reform design.
For insurers and intermediaries, the structure of the ESL has long been a material factor in pricing, product design, and customer communications in NSW. Because the levy is calculated as a percentage of premiums, customers in areas with higher extreme weather risk pay both higher premiums and higher ESL charges. Industry bodies have argued that this structure increases affordability pressures in higher-risk communities and may contribute to underinsurance.
The Insurance Council of Australia (ICA) said extreme weather risk remains the largest single component of premiums, with taxation the next largest. It has estimated that the NSW government collected $1.3 billion from insurance customers through the ESL in 2024–25. According to ICA analysis, households with the greatest flood exposure are often in lower-income areas. Around 70% of households exposed to the highest level of flood risk are in locations where the median income is below the national average, and about 35% are in areas where median income falls below the poverty line. The council has argued that a broader-based property levy would more closely reflect the community-wide nature of emergency services, which are not limited to insured properties.
Industry groups have publicly supported the move to put ESL reform before a parliamentary committee, while emphasising affordability, equity, and stable agency funding as priorities. The ICA said it “welcomed” the government’s commitment to pursue reform via an inquiry and has described the process as an opportunity to change the state’s emergency services funding model. ICA CEO Andrew Hall said: “The announcement today by Treasurer Daniel Mookhey is an important next step toward fairer emergency services funding in New South Wales. The current system has repeatedly been found by multiple independent reviews to be unfair and unsustainable. We’re committed to working with the government and Parliament to develop a model that improves affordability while sustainably funding emergency services.”
The National Insurance Brokers Association of Australia (NIBA) has also reiterated its long-standing position that an insurance-based ESL disadvantages those who purchase cover. NIBA said the current levy accounts for about 18% of the cost of household insurance in NSW and more than 30% of the cost for businesses. The association has linked these tax components to wider affordability challenges and has highlighted the interaction between the ESL and underinsurance, noting that almost 35% of households in the state are estimated not to hold contents insurance.
NIBA CEO Richard Klipin characterised the inquiry as a chance to review funding settings and the level of insurance coverage in the community. “The announcement to reform the Emergency Services Levy through a Parliamentary inquiry is a positive move towards creating a fairer and more equitable system for all. The current NSW ESL model penalises responsible home and business owners who invest in insurance to protect their assets. NIBA has consistently highlighted the need to rectify this imbalance and create a system that incentivises responsible risk management practices and increases insurance affordability. This inquiry is an opportunity to help develop a model that is fairer, simpler, and supports increased insurance participation across the community,” Klipin said. NIBA has also noted the government’s stated intention to publish an options paper outlining multiple levy designs and its emphasis on safeguarding vulnerable community members while ensuring sustainable emergency services funding.
For insurers, underwriters, and brokers, any transition away from an insurance-based ESL will have operational and commercial implications, including changes to rating structures, premium breakdowns, customer disclosures, and system configurations for NSW books of business. The timing and sequencing of reform, including any phase-out period for the current ESL, will be of interest to product teams and distributors planning renewals and pricing strategies. Stakeholders are also likely to examine how any new property-based charge will interact with local government rating systems, concessions, and hardship arrangements. As the parliamentary inquiry proceeds, industry participants are expected to provide submissions on the relationship between levy design, risk-based pricing, and insurance take-up. For insurance professionals, the process is expected to influence the future cost structure of NSW property insurance and the funding base for emergency services in the state.
