Insurers say a government levy to help fund emergency services is adding hundreds to premiums in NSW and has left the state with some of the worst coverage rates in the country.
The Emergency Services Levy is currently adding around 15 per cent to annual premiums in NSW, a report by the Insurance Council of Australia (ICA) revealed on Monday.
The body says this is contributing to an estimated 13 per cent of NSW households going uninsured - roughly double the rate of uninsured homes in Victoria.
NSW is the only state to have the levy which helps fund fire and emergency services including Fire and Rescue, Rural Fire Services and State Emergency Services.
Insurers pass the cost of their liability under the scheme to customers, raising the price of premiums.
ICA chief executive Andrew Hall said whoever wins the March state election should find a way to fund emergency services without having the burden fall to insurance policy holders.
"Home insurance customers in NSW are paying the most tax in Australia and this is leading to lower levels of insurance when compared to other states," he said.
Treasurer Matt Kean responded by saying the levy helps the government maintain record amounts of investment in the state's emergency response capabilities.
"While big insurance is entitled to maximise profits for its shareholders, insurers should acknowledge this comes at a cost to those who they won't insure at all," he said.
Mr Kean said the high number of people going uninsured in NSW was due to a lack of affordable policy options that meaningfully cover natural disasters.
He said the government had urged the insurance industry to respond to its investment in natural disaster mitigation by offering more diverse and affordable insurance products to the market.
"The NSW government has stepped up to the plate - we would encourage the insurance sector to do the same rather than create stressful situations where people are forced to give up their insurance due to the cost of trying to do the right thing and protect their homes," Mr Kean said.
Last year insurers received 150,100 claims in NSW relating to extreme weather, totalling damages to insured goods of $3.3 billion.
The majority of damage was a result of the February-March floods which saw almost $2.9 billion worth of destruction to insured goods across the State.
As part of its campaign to ditch the levy, the ICA launched a series of ads calling on the government to "find a fairer way" to fund emergency services.
