Why your home and contents insurance premiums will go down in 2017
More than 20% of your home insurance premiums are currently going towards the NSW Emergency Services Levy (ESL). The NSW government uses this money to fund emergency services around the state, but households with insurance are shouldering a disproportionate proportion of the costs.
- $1 billion per year. The yearly operating costs of NSW fire and rescue services exceed $1 billion per year.
- 73.7%. Insurance levies fund more than 70% of this enormous cost, and insurers pass these costs onto their customers.
- 20% to 40%. The ESL increases the cost of property insurance by about 20% for homes and 40% for businesses.
On 1 July 2017, the ESL will be replaced by a property-based levy, and you can expect a significant decrease in your property insurance as a result. The cost of the ESL will be added to council rates, which you can expect to rise.
This is good news for anyone with a building and contents insurance policy, whether residential, business or both. According to NSW government estimates, the average insured household can expect to save $40 per year.
However, households without insurance will see an increase in costs.
Why the change?
Everyone benefits from the Emergency Services Levy, but insured households pay the majority of the cost. A property-based levy helps spread the costs more evenly, driving down the cost of home and contents insurance policies.
This will also help combat the problem of underinsurance in NSW by making premiums more affordable.
The Insurance Council of Australia estimates that over 20% of Australian homes do not have a building or contents insurance policy, and this change will help more people get cover.
- Cheaper home insurance is good for everyone. When Western Australia phased out their emergency insurance levy, the rate of non-insurance dropped from more than 25% to less than 10%. Not only was home insurance cheaper, but all taxpayers were saving more money.
- The cost of home insurance premiums is based on the insurer’s costs and risks. The removal of this levy means their costs are lower, and the savings will be passed onto all homes and business in NSW with building or contents insurance.
How do I know the savings will be passed on?
The 2017 ESL changes also include major penalties for any insurers that do not pass savings onto customers. July 1 is the deadline for ESL to be totally transitioned out, and home insurance companies are already dropping their premiums in preparation.
You don’t have to worry about getting taxed twice if you buy a home insurance policy before July. The final ESL charge will be for the 2016-2017 financial year, and the first property-based charge will be for the 2017-2018 year so no matter when you get cover, you won’t be double-taxed.
If the cost was keeping you from getting home and contents insurance, it might be time to take a second look and get fresh quotes. This is an even better idea for business insurance, which is seeing an even bigger drop in prices.
What to know: 2017 ESL transition at a glance
- Council rates are going up, and insurance premiums are going down.
- The typical NSW household with home insurance will start saving about $40 per year.
- Households without insurance will only get a rate increase and no savings.
- Insurance companies are legally required to pass the savings onto their customers.