The latest with the ESL on insurance policies in NSW

In December 2015, the NSW Government announced the abolition of the Emergency Services Levy (ESL) on insurance policies as from 1 July 2017. From that date, the emergency services will be funded by a property levy, to be paid alongside council rates.

NIBA has met with the NSW Treasurer, Treasury officials, and the Deputy Emergency Services Levy Insurance Monitor, Dr David Cousins. The following is a summary of the position as we currently understand it.

  1. The ESL on insurance policies in NSW will be removed on and from 1 July 2017.
  2. Until that time, the current ESL obligations will apply to insurance companies and others who are required to collect the levy under the current legislation.
  3. Each insurance company will determine its approach to the phasing out of the ESL in NSW. This is expected to follow a broadly similar approach when the Fire Services Levy was abolished in Victoria.
  4. The Government is preparing special legislation to create the role of Emergency Services Levy Insurance Monitor. The role of the Monitor will be to ensure that the removal of ESL is fully passed on to policyholders, and that no unfair advantage is taken of the change. The legislation is expected to be similar to legislation passed in Victoria for the phasing out of FSL in 2012-2013.
  5. The Government has appointed Professor Alan Fels AO as the Monitor, and Dr David Cousins AM has been appointed Deputy Monitor. The Monitor and Deputy Monitor have started to meet with insurers and others in order to prepare for the transitional period.
  6. The Monitor will gather information from insurers and others responsible for collecting ESL to establish how the transition is being implemented. The Monitor is expected to have power to intervene when they regard pricing to be unreasonable during the transition period, or when false or misleading comments are being made in relation to the ESL reform.
  7. The Monitor has indicated they will publish guidelines which will set out their expectations for the transition period. The transition period for the phasing out of the levy extends over the 2015-16 and 2016-17 financial years. Insurers will make their own independent decisions as to how they meet their ESL obligations during the transition period. Some insurers have already announced their initial approach for the phasing out of the levy.
  8. The Government and the Monitor expect that the full impact of the elimination of ESL will be passed through to final premiums on and from 1 July 2017.
  9. The Monitor has indicated that any over-recovery of ESL during the transition period will need to be refunded to policyholders.
  10. The Monitor has asked insurers and insurance brokers to clearly communicate to policyholders the effect of the removal of ESL on their premiums. The Monitor has suggested this would be best achieved by providing a comparison of current and past premiums on insurance renewal notices.
  11. The special legislation will include powers to “name and shame” anyone acting in breach of the legislation, and financial penalties will also be available.
  12. There will also be power to intervene, and penalties, when false or misleading statements are made in relation to the phasing out of the ESL on insurance premiums and the introduction of the new property levy.

NIBA will continue to meet with the Monitor during the transition period, and we will keep members informed of developments relating to the new legislation and the Monitor’s guidelines. We have advised the Treasurer that we will do our best to ensure a successful abolition of the ESL on insurance policies in this State.

NIBA’s strong advice to brokers is:

  1. ESL is to be charged at the rate determined by the insurer. The rates can and will vary as between insurers. Brokers must follow the direction of the insurer, and must not determine their own ESL rate during the transition period.
  2. Please do not make uninformed comments to clients or others regarding the phasing out of the levy or the introduction of the new property levy. NIBA will inform members as soon as the Government publishes information on these reforms for the benefit of policyholders and land owners, and members are strongly urged to refer clients to the Government information sites (when available).

If you have any questions at all on this matter, please direct them to NIBA CEO Dallas Booth.