The Insurance Council of Australia (ICA) told committee members that the tax, known as the Emergency Services Levy (ESL), is pushing up the cost of insurance for New South Wales (NSW) families and costing the economy half a billion dollars anually on top of the AUD 1.4 billion it collects.
Currently, the levy adds around 18% to the average home insurance premium, and 34% for businesses, so every dollar raised ends up costing the community about AUD 1.30, creating a protection gap, where vulnerable households are being left behind due to higher costs.
According to the ICA, NSW families are paying an average of AUD 308 a year in the hidden government tax on their insurance bill, and in flood-hit towns like Lismore, a typical household pays around AUD 740.
Additionally, over 1.1 million households across the state have no contents insurance at all, but making insurance more affordable by removing the levy from insurance would see an estimated 320,000 households take out cover, urged ICA.
At the public hearing held on 8 September 2026, ICA appeared alongside Suncorp, IAG, and the National Insurance Brokers Association. Lateral Economics, which conducted independent modelling for the ICA, found that most households would be “better off under a property-based levy even after the replacement charge is paid, with the average household ahead by around AUD 55 a year.”
Moreover, the ICA questioned why NSW is the only jurisdiction in the country still funding fire trucks and flood rescue through a tax on household insurance premiums, with other states and territories raising the money through property rates or general revenue.
The modelling also confirmed that shifting the levy onto property would cut the economic damage caused by the current system by almost 80% and deliver benefits to the NSW economy in the range of AUD 317-460 million every year.
Additionally, small businesses stand to gain the most, with a suburban mechanic currently paying around AUD 12,000 a year in the levy and a family restaurant around AUD 9,300, clarified the ICA.
Andrew Hall, Chief Executive Officer, ICA, commented, “Most people have no idea this tax exists, because it is a state government charge that gets bundled into your premium rather than sent out as a bill with its own name on it. The people copping the worst of it are the ones who can least afford it, because the levy is charged as a percentage of the premium, so the higher your risk the bigger your tax bill, and the families in flood and fire country are already paying the most for cover.
“This is a question the rest of the country worked out years ago, and there is nothing unique about New South Wales that makes fire trucks harder to fund here than they are in Queensland or Victoria or South Australia. The majority of households across the State come out in front under a fairer system, and so do the small businesses that have been quietly carrying an enormous share of this.”
