New South Wales Premier Gladys Berejiklian has shocked insurers with her decision to defer a plan to include the Fire and Emergency Services Levy (FESL) in property rates, just a month before the new system was due to be implemented on 1 July.
Ms Berejiklian announced she would legislate to overturn a law she got through parliament just three months ago. She said that she might legislate again to reintroduce the levy, after a government review, to see whether it can get the scheme right.
She said that she had no choice after it became clear that commercial property owners were going to bear a big burden from the levy, reported The Daily Telegraph.
She blamed Treasury modelling for failing to identify the disproportionate impost the scheme would have put on small and medium-sized business.
Currently, the FESL is levied on property insurance premiums, which insurers say is unfair since the uninsured also enjoy fire services.
"Costly blow to New South Wales"
In a statement, the Insurance Council of Australia (ICA) said that the state government's announcement was delivered without consultation with insurers. It said: “Insurance companies are shocked and disappointed with the Berejiklian government’s decision to delay the introduction of the Fire and Emergency Services Levy (FESL) on properties.
“The decision is a blow to New South Wales property owners, households, businesses and the broader state economy. The ESL will continue to deter the community from taking out the insurance we all need.”
The statement added: “The government now requires insurance companies to continue collecting the old Emergency Services Levy (ESL) beyond 30 June, for an unspecified portion of the 2017-18 financial year. It is concerning that no deadline has been set for recommencement of the reform.
“This has significant legal and commercial implications for the industry. It is a logistical and technical challenge that will cause confusion and increase premiums for policyholders.
“The resumption of ESL collection will come with significant additional costs that the industry will be forced to pass on in full to policyholders.”
The ICA pointed out: “The NSW government has had more than 18 months to design and implement its new FESL system. Every other mainland state has abolished emergency services levies on insurance with little fuss.
“Insurers have spent more than a year and tens of millions of dollars on consultants and technological system changes in preparation for the removal of the ESL from 30 June. They have worked without the certainty of legislation, which was only passed in March.
“The government’s failure to introduce its FESL on time calls into question the notion that emergency services should be funded separately rather than through consolidated revenue.”