Why should NSW Insureds foot the majority of the bill for improvements in emergency services?
It is disappointing to me that at a time when insurance premiums are rising, and will no doubt rise further with the various natural catastrophes occurring around Australia, that the NSW government are seeking to increase the Emergency Services Levy on those that are prudent enough to Insure.
The whole collection method is already a nightmare. Let me explain why. The NSW Government (Treasury) sets the budget for FSL and then tells the insurance industry to collect 70% of it, the other 30% comes from the councils.
With rate increases across home and contents as well as the fire and business interruption sections of business policies insurers have had to drop the percentage they charge to try their best to match collections with the amount they have to pay to government. For example Vero are dropping the Emergency Services Levy (“ESL”) to 29% (from 34%) from April on commercial risks because the real penalty to an insurer is in over collection! If an insurer over collects they have to refund the amount to the affected policy holders. Not only is this a lot of additional administration work for them as the reluctant tax collector, but it has the potential for bad publicity at a time the industry is working hard to rebuild trust in their product.
As Insurers can’t over collect they aim to under collect, the shortfall must be made up by the insurers themselves and this of course is then another expense impacting on the cost of insurance.
The problem is until July 2019 (or thereabouts) the industry do not actually know what market share they have so therefore they do not know how much we have to pay for the previous Financial year. That’s what’s unfair to insurers, it is a moving target that consumes resources.
Could anything be more complicated, inefficient or unfair. That is why ever other main land state and territory in Australia has long got rid of this ridiculous tax, a relic from the late 1600’s in the UK.
Add to this the change to the workers compensation for fire fighters is being funded from this budget from FY 2020 which is a significant increase on FY 2019. Relying on an experienced underwriter, the best guess is that ESL will be in the order of 40%, remember this will be on higher base premiums, for the year ended 2020 for commercial risks.
If nothing else a gazetted rate (from treasury) for ESL would make this significantly less onerous for insurers but why would this government want to do anything to assist a vital industry that protects their economy and the members of the electorate they claim to represent after they stuffed it all up in the first place.
As every single independent report has shown, it would be much fairer for the people of NSW if the levy was removed from Insurance and spread across the entire community, on the basis that everyone benefits from the service and therefore everyone should contribute.
There is no doubt that claims from bush fire, storm, hail and flood will increase with climate change as well as our growing population and urban spread and therefore more than ever we need to make insurance as affordable as we can, while at the same time, provide high quality emergency services to protect the public.
Emergency services are there to not only protect property which is Insured, but also people’s lives. This is yet another reason why it should be a broad based property tax.
The insurance industry represents a large proportion of the voting populous and I would urge all of us in the insurance industry to carefully consider this point when making your decision in who to vote for in the upcoming elections, only 7 weeks out.