The New South Wales Government has announced that it will defer the introduction of the fire and emergency services levy (FESL) in a bid to stop SMEs facing an unreasonable burden.
The Government had announced earlier this year that, instead of funding fire and emergency services through an emergency services levy (ESL) on insurance policies, it would move to a levy on property on July 01.
As a result, recent media reports found that some small businesses and residential property holders would be set to pay double or triple their current amount, despite being fully insured.
“The Fire and Emergency Services Levy will continue to be collected via insurance policies until the NSW Government has completed its review of the policy, and the funding requirements of fire and emergency services agencies will be met in full,” the Government said in a statement.
Insurance Council of Australia spokesperson,
Campbell Fuller, said that insurers are “shocked and disappointed” by the decision.
“The decision is a blow to New South Wales property owners, households, businesses and the broader state economy,” Fuller said. “The ESL will continue to deter the community from taking out the insurance we all need.”
Dallas Booth,
NIBA CEO, said that the insurance industry has campaigned for many years to provide policyholders with a fairer outcome.
“The responsibility of the Government was to determine an appropriate property levy, which has been done elsewhere around Australia,” Booth told
Insurance Business. “It is a surprise that the property levy has become a serious concern to the Government to the point where they don’t think they can proceed with the reform.”
The Insurance Monitor, headed by Allan Fels, will oversee the continuation of the existing system as the state government will work with the insurance industry, local government, fire and emergency services and other stakeholders on a new approach.
Booth noted that, with one month to go until the proposed reforms were to be implemented, much remains unknown for brokers and insurers.
“I really don’t think insurance companies and insurance brokers can switch back to the old system on 30 days’ notice,” Booth continued.
“This takes six to 12 months to prepare for and I think that we are going to have to work with the insurers and ultimately with Government to find out what can be done in the short-term.”
Fuller stressed that the industry had spent more than a year and millions of dollars in consultant fees and system changes in preparation for the removal of the levy.
Insurers will face significant commercial and legal implications, Fuller continued, as confusion for policyholders will be increased.
“The resumption of ESL collection will come with significant additional costs that the industry will be forced to pass on in full to policyholders,” Fuller said.
Premier Gladys Berejiklian and treasurer Dominic Perrottet announced the deferment and noted the concerns of the community.
“We are committed to reducing NSW’s high rates of under insurance and to making the funding of our fire and emergency services fairer – but we want to get this right,” Perrottet said.
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