The National Insurance Brokers Association (NIBA) has made a submission to the New South Wales Government Independent Bushfire Inquiry arguing that the insurance-based Emergency Services Levy (ESL) should be replaced with a property-based levy.
The submission indicates that the most concerning aspect for NIBA is the current inequity that currently exists with the funding of emergency services in New South Wales and the effect the levy and other government taxes have on rates of under and non-insurance.
The submission categorically states that the ESL system acts as an incentive for property owners to arrange alternative risk financing mechanisms, such as mutual pools and captive insurance, that do not attract the levy. While these arrangements have many benefits for property owners each time this occurs traditional policyholders have to carry a higher proportion of the ESL, as general insurers are each levied a pre-determined dollar amount and not a percentage rate on premiums.
The ESL has also been criticised for being a needlessly opaque and complex funding model. The ESL is generally poorly understood by the public, while individual policyholders may not be aware of the extent to which they are funding New South Wales emergency services.
The Association’s submission makes a strong case for a move to funding fire services by way of a property levy. It states, “Such a move would increase efficiency, effectiveness, simplicity and transparency. It would eliminate the current compounding of state and federal taxes and encourage individuals and businesses to appropriately mitigate their risks, reducing reliance on government assistance post event.”
NIBA will also be making a submission to the Royal Commission into National Natural Disaster Arrangement, however there are a number of issues specific to the state that impact natural disaster preparedness that NIBA wishes to make comment on.
You can read the entire submission here.