The National Insurance Brokers Association (NIBA) is advising brokers to pay close attention to New South Wales’ proposed overhaul of the Emergency Services Levy (ESL), following the release of an options paper by NSW Treasury outlining five possible replacement models. In an explainer to members, NIBA noted that “NSW Treasury has released an options paper presenting five possible models for replacing the Emergency Services Levy (ESL).”
NSW remains the last mainland Australian jurisdiction to fund emergency services predominantly through a levy on insurance rather than through a broad property-based mechanism. Under the existing system, the ESL is charged to insurers and passed through to policyholders, mainly insured households and businesses. The proceeds contribute to the funding of Fire and Rescue NSW, the NSW Rural Fire Service, and the NSW State Emergency Service.
Treasury’s analysis links the insurance-based ESL to higher premiums and to underinsurance and non‑insurance, as some households and businesses adjust coverage or opt out in response to rising costs. With climate change projected to increase the frequency and severity of natural disasters, the underlying cost of emergency services is expected to rise, which would place additional pressure on an insurance-linked levy. From NIBA’s perspective, any move to separate emergency services funding from insurance products would alter how the total cost of risk is presented to clients. That would have implications for brokers’ renewal discussions, placement strategies, and advice on coverage adequacy and affordability.
The reform program, first announced in November 2023, seeks to replace the ESL while preserving funding for emergency services agencies. The government has identified three central objectives:
The options paper sets out a high‑level design framework based on increasing fixed charges applied to land values. The framework is guided by the principles of cost recovery, equity, efficiency, simplicity, and sustainability. Land value is used as a proxy for capacity to pay, with contributions tied to ownership of property, rather than to individual insurance choices, coverage levels, or risk ratings. Treasury describes the approach as a community‑based design, on the basis that all property owners benefit from emergency services and should make at least a minimum contribution. The paper also indicates that concessions would be available for pensioners, and that hardship provisions and transitional arrangements are under consideration, including the possibility of phasing in the new system rather than implementing it in a single step.
NIBA has drawn brokers’ attention to Treasury’s five example levy models. Each option uses tiered fixed charges based on land value but distributes the levy burden differently across sectors, property types, and regions:
The government has not identified a preferred model. Treasury emphasises that the five options are examples designed to inform the Legislative Assembly Select Committee on Emergency Services Funding Reform, rather than a final policy package.
Using 2023-24 data, Treasury’s modelling suggests that around 55% of insured properties would have incurred a lower charge under any of the five replacement levy options than under the current ESL. For insured residential properties, the average reduction is estimated at about $65 per year. The analysis indicates that owners of insured properties with lower land values are more likely to see a decrease in their levy burden than owners of higher‑value properties. Insured residential properties outside Greater Sydney are also more likely to pay less under a land‑value‑based levy, reflecting the combination of generally lower land values and comparatively high ESL costs under the present system.
At a sector level, average levy burdens for farm and public benefit properties are expected to be broadly similar to those under the ESL, while commercial and industrial property owners are projected to face higher average charges under a replacement levy. Because the proposed models use fixed charges within each land‑value tier, any increase relative to the current ESL is capped at the fixed amount for that tier, while reductions may be larger for some cohorts.
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For insurance professionals, key implication of the reform is that emergency services funding may be shifted from insurance premiums to a separate property-based charge, while the total funding requirement remains unchanged. If implemented on that basis, this would alter the composition of premiums, with potential reductions in the ESL component on policies and corresponding changes to property‑related outgoings. Treasury argues that breaking the link between the levy and premiums would “remove the disincentive for property owners to take up adequate levels of insurance” and could influence coverage patterns over time. For brokers, that scenario would change conversations about the total cost of risk, as clients weigh premium movements against any new or revised property levy.
The options paper also indicates that a property-based levy would bring NSW into line with other mainland states and the Australian Capital Territory, which already use property charges to fund fire and emergency services. As the Legislative Assembly committee progresses its inquiry and reports back to Parliament, NIBA has signalled that brokers should follow the process closely, given potential impacts on pricing, client communication, and product placement. Future decisions by the government and Parliament will determine the final levy structure, timing, and transition approach. In the interim, NIBA’s material to members focuses on explaining the options and encouraging brokers to understand how different models could affect clients’ overall cost of risk under a land‑value‑based emergency services funding system.
