THE EMERGENCY SERVICES LEVY ON INSURANCE IN NEW SOUTH WALES (NSW)
The NSW Government had planned to replace the existing insurance based emergency services levy (ESL) in NSW with a property-based levy to be paid by NSW property owners alongside their local council rates from 1 July 2017. To oversee and monitor the transition to the property-based levy, the NSW Government appointed an Emergency Services Levy Insurance Monitor (Monitor).
On 30 May 2017, the NSW Government announced that it would defer the introduction of the property-based levy for at least two years and re-establish an insurance based emergency services contribution scheme.
This information page has been prepared by Liberty Specialty Markets (Liberty) in Australia to explain how ESL continues to apply to insurance in NSW. Liberty is committed to ongoing compliance with the re-established contribution scheme, having regard to applicable guidelines issued by the Monitor.
The information relates to NSW only.
What is ESL?
The ESL is a levy on general insurers to fund emergency services organisations. ESL is calculated based on the premiums for certain types of insurance policies.
What types of insurance policies does ESL apply to?
ESL applies to the following types of policies:
- property (including consequential loss)
- house building and/or contents
- personal effects (including jewellery, clothing and works of art)
- motor vehicle and motor cycle
- marine and baggage
- crop and livestock
Different rates of ESL contribution apply across the types of policies, with property and house building and/or contents insurance being subject to higher rates than the other types.
How does an insurance company contribute and charge ESL?
Each insurer pays a total contribution to the NSW Government for ESL for each emergency services funding year, which commences on 1 July. The contribution is set by the NSW Government and adjusted according to the insurer’s market share within the year.
The insurer needs to collect and fund this contribution by charging an ESL component on the applicable insurance policies, as a percentage of the base premium, which is the premium before government levies and taxes are added.
The other levies and taxes are then added in the following order:
- Base premium
- ESL (where applicable)
- Federal (Commonwealth) goods and services tax
- NSW stamp duty (where applicable)
ESL is therefore subject to GST and stamp duty. Where a policy covers locations inside and outside NSW, the ESL will apply only to the NSW part of the overall premium.
When was the property-based levy deferred and ESL re-established?
On 30 May 2017 the Government announced it was deferring the introduction of the new levy.
The Government stated that, effective 1 July, 2017, ESL would be re-established and continue to be collected via insurance policies until the completion of a reform policy review. At this stage, there has been no date announced for the introduction of the new property-based levy.
So now, with deferral of the property-based levy, ESL will continue to be collected with insurance policy premiums.
Why has the ESL on your policy changed (or increased) from last year?
Prior to the NSW Government's announcement to defer the property-based levy, we progressively removed ESL for policies due for renewal from 1 July 2016 to 30 June 2017. With the deferral of the property-based levy and the re-establishment of the contribution scheme, ESL will continue to be added to insurance policy premiums.
Policyholders may be subject to higher rates of ESL for applicable policies commencing or renewing from 1 July 2017, compared to the corresponding period in the previous year commencing 1 July, 2016. The amount of the ESL may have increased from your last renewal for this reason.
What do you need to do?
You don't need to do anything. Any ESL collected with your policy will be used to fund NSW emergency services and your policy documents will show your contribution. Your ESL contribution will continue to be collected with your policy premium until the NSW Government advises us otherwise and we'll keep you updated as we find out more.
How can policyholders find out about any ESL or base premium movement?
For most types of applicable policies ESL will be listed as a separate component together with the total estimated or actual premium.
Any ESL movement will generally be due to one or more of the following factors:
- a higher rate of ESL applies than before, because ESL rates having been increased back to full funding levels and to account for there being less time to recoup the total 2017/18 contribution;
- the base premium has increased, and this has increased the ESL amount.
If there is a base premium movement in relation to your policy, this could be due to one or more of the following:
- indexation of sums insured
- mid-term changes to the policy
- a general increase applicable to all similar policies
- a reason specific to your policy, such as claims history
Liberty will in many cases confirm to your insurance broker the reasons for any material ESL movement or base premium movement. You can also confirm the explanation for either movement with your broker or Liberty. Liberty’s movements in ESL charged reflect its view of the amount required to recoup its ESL contribution.
The expected reduction in the cost of insurance premiums to reflect the removal of ESL will therefore not occur until the new property-based levy commences.
Can policyholders compare renewal premiums to last year?
Yes – your insurance broker probably already does this for you. You can also request that Liberty provide a comparison of the total premium and its components, including ESL, to compare to last year.
Want more information?
For more information on:
The NSW Insurance Monitor - visit the ESL Insurance Monitor website
Your insurance policy or anything else - call us or visit https://www.libertyspecialtymarkets.com.au
If you would like further information
Contact your insurance broker in the first instance, or Liberty via email if you have any questions about your policy.