NSW’s largest insurers have given evidence and answered questions on how they will ensure customers won’t be overcharged and will get the savings they are entitled to, when emergency services funding is removed from NSW home insurance policies on 1 July 2017.
Insurance Monitor Professor Allan Fels and Deputy Insurance Monitor Professor David Cousins lead the Inquiry investigating insurance pricing. Penalties up to $10 million may apply to insurers who charge unreasonably high prices or engage in false or misleading conduct.
Insurance companies including Insurance Australia Group (includes Coles, NRMA and Insurance Manufactures Australia), Allianz Australia, QBE Insurance (includes Elders Insurance) Suncorp and Commonwealth Insurance have presented at the Inquiry. Together, these insurers represent almost 80 per cent of the NSW property insurance market. The Insurance Council of Australia (ICA) provided a submission to the inquiry but was not asked to provide evidence.
From July 1, 2017, firefighting and State Emergency Services activities in NSW will no longer be funded by a levy on insurance premiums. No policies will have an ESL component on or after July 1. Instead, all property owners will pay a levy through their council rates.
ICA CEO Rob Whelan said: “The imminent removal of the ESL from premiums will help improve the affordability of insurance and lower the levels of underinsurance in NSW.
“Today, insurance companies were pleased to appear before this public inquiry to explain how they are transitioning to the removal of the ESL. Insurers will pass on to their customers all savings attributable to ESL removal.
“With more than 100 insurance companies and brands collecting ESL from their household and commercial customers – in 2016-17 about $785 million will go to the government – this reform will have a widespread impact on NSW customers.
“For many decades this unfair and inequitable tax has added about 20 per cent to household premiums and 30 per cent to commercial premiums, and has penalised those property owners who have chosen to insure their assets despite the entire community being protected by firefighting and emergency services.”
The companies discussed how the changes were being explained to their customers. They detailed factors that may affect base premiums for many consumers, as well as levels of competition and financial performance.