Earlier this year, Hans received his annual home insurance bill, which had increased by nearly $1,000 from the year prior.
The total was $3,590, which included about $1,000 in government taxes and levies.
Hans, who asked to only use his first name for privacy reasons, is a pensioner from regional New South Wales whose home was impacted by Cyclone Alfred last year.
"The only option [to reduce the premium] was to increase the excess from $600 to $2,000, which is a pretty big excess," he said.
Because his premium increased, his government taxes also increased, as they are calculated as a percentage of the base premium.
For example, his emergency services levy (ESL) jumped to $362, up from $273 the year prior.
"I think the taxes need to be looked at," he said.
"Insurance is sort of treated as a lucrative revenue-raising source and that annoys me because it's not something that you can choose to have or not have."
NSW is the only jurisdiction to fund emergency services through a tax on insurance companies, which is then passed on to customers through premiums.
The state also levies local councils and foreign insured policy holders.
All other jurisdictions have moved to a property-based model or fund services from general revenue.
It also has some of the highest rates of non-insurance in the country, with about 36 per cent of homes holding no contents insurance.
A coalition of industry stakeholders — the Insurance Council of Australia, Strata Community Association NSW, Financial Rights Legal Centre, NSW Council of Social Service, Committee for Sydney and the National Insurance Brokers Association — are calling on the NSW government to scrap the insurance tax before the March 2027 state election.
NSW Premier Chris Minns has committed to removing the ESL since 2023 and "replacing it with a simple and transparent levy spread across all properties".
A NSW parliamentary inquiry into options for reducing insurance costs and changes to emergency services funding is underway.
Levy increases 54 per cent
The ESL has increased 54 per cent in the past six years, according to the Insurance Council of Australia (ICA).
The ICA said the ESL raises about $1.4 billion annually for government budgets, accounting for about three-quarters of NSW emergency services funding.
It estimated the ESL adds up to 18 per cent to household insurance premiums and up to 34 per cent to business premiums, before GST and stamp duty are applied on top.
Andrew Hall says households should not have to foot the bill for emergency services. (Supplied: Insurance Council of Australia)
"The cost of emergency services should not fall disproportionately on families and businesses that do the right thing by taking out insurance," said Andrew Hall, Insurance Council of Australia chief executive.
Modelling commissioned by the ICA found more than 2 million NSW households would be better off under a replacement property levy.
The average insured household would save $308 a year on insurance costs and be around $55 better off overall after paying a replacement levy, it found.
Households in disaster-prone regional areas would benefit the most, saving about $565 annually.
Financial Rights Legal Centre external relations and advocacy principal Julia Davis said the most vulnerable households get "pushed into the highest risk areas and the least resilient housing".
Julia Davis says home owners in disaster-prone areas are already paying more for insurance. (ABC News: Scott Preston)
"They are already paying more to protect their homes than households in less exposed regions," she said.
"They should not have to pay more for the same emergency services that are available to all households and businesses."
The ICA also estimated that small businesses could save money under a replacement levy, from $105 for a bakery to more than $21,000 for a small livestock farm.
Climate concerns for insurance industry
Government levies are far from the only concern for the home insurance industry.
Industry stakeholders, including banks, are looking at how they can better respond to climate events in regional towns. (ABC News: Jeremy Story Carter)
Industry stakeholders are also worried about other types of financial stress on towns impacted by climate change, including the future viability of bank loans.
Already, climate change has caused home insurance premiums to increase by more than 50 per cent.
Customer-owned banks have joined with actuarial and analytics firm Finity and Climate KIC Australia to look at how they can support communities through climate change.
Christopher Lee says communities can forward plan for disasters. (Supplied: Chris Lee)
Christopher Lee is chief executive of Climate KIC Australia, part of the University of Technology Sydney's Institute for Sustainable Futures.
He said the goal over the coming years was to equip regional towns with skills and tools to prepare and respond to climate events.
"That may be in strengthening their internal operations ... forward planning for particular disasters that may occur," he said.
Sharanjit Paddam says banks may be caught with losses if home owners are not insured. (ABC News: Dan Irvine)
Finity principal Sharanjit Paddam said this collaboration contributes to the future viability of communities.
"When [banks] lend you money for your home loan, [they] require you to have insurance," he said.
"If that insurance is out of reach for you and there is a disaster, then the bank will be stuck with the losses."
One of the ways to improve this, according to Mr Paddam, is for banks to continue offering "green loan products".
"So helping households get solar, helping households get batteries and electrify their homes, that allows households to insulate themselves," he said.
Uninsured homes on the rise
More households across Australia are experiencing home insurance stress, with the proportion of households facing unaffordable insurance climbing from 10 per cent in 2022 to 15 per cent in 2024.
More households across Australia are experiencing home insurance stress, as climate change disasters like flooding increase. (Supplied: City of Melbourne)
The financial regulator estimates one in seven Australian houses are currently uninsured, a figure that could rise to one in four by 2050.
Researcher Peter Kamstra from the University of Melbourne said there needed to be financial incentives for home owners to make their homes more resilient in the face of climate change.
"A lot of the people we've spoken to, they want to take action, but it's a difficult cost-benefit analysis to invest thousands ... unless there were lower premiums or sort of better insurance outcomes," Dr Kamstra said.
His research into flood insurance decision-making in Victoria found home owners understood the risk caused by certain weather events, but the system was "too complex" to navigate.
"Part of the flaw with communicating risk is there's no real engagement before," he said.
"It's a letter, it's sort of bad news, it's a text message that lets people know that they've been rezoned.
"Many people have told me we lose trust in the system because they weren't engaged before ... they don't feel involved."
