Australia’s major insurers have pledged to not apply the Emergency Services Levy when it is removed on 1 July 2017, according to the Emergency Services Levy Insurance Monitor.
Insurance Monitor Professor Allan Fels AO sought and received assurances from CEOs of IAG, AAI Limited (including Suncorp, AAMI, GIO, Bingle APIA), Allianz, QBE, Commonwealth Insurance, Youi, Auto & General Insurance Co, Westpac, Zurich and The Hollard Insurance Company to remove the ESL from policies after 1 July.
“As a result, insurers need to drop prices by up to 20 per cent for an average property insurance policy issued after 1 July 2017,” says Fels. And for commercial policies the reductions are expected to be around 30 per cent.
“When a CEO gives a public commitment like this it means their credibility is on the line. They are expected to pay even greater attention to ensuring their company is fully compliant with the law and our guidelines.”
The NSW Government introduced the new laws to implement the Emergency Services Property Levy last month, finally putting an end to the levy that many in the industry considered an unfair insurance tax.
ICA CEO Rob Whelan has said: “No longer will the responsibility for funding these vital services be borne only by households that purchase insurance, but by the entire community. Everyone benefits from these services, and it is only fair that all homeowners contribute to their upkeep.”
Insurers have been preparing for the transition since it was announced in December 2015, and Fels is keen to ensure they implement appropriate systems and procedures to facilitate the removal of the ESL.
“We have extensive powers under the legislation to monitor the insurance industry’s pricing practices and take action to protect consumers from price exploitation during the removal of the ESL,” Fels warns again.
“We will not hesitate to take strong action if necessary to deal with any failures to comply.”
Already, an inquiry is underway and insurance companies will be compelled to provide evidence about their conduct. The inquiry, to be held on 16 May, will focus on how insurers will ensure they pass on cost savings to consumers.
NIBA CEO Dallas Booth has welcomed the abolition of the ESL and at the same time has reiterated that brokers should appoint a senior manager to oversee the phase out in their office. NIBA recommends brokers apply the ESL rates determined by the insurer, and not set their own rates. Further, brokers should not make uninformed comments to clients regarding the phase out. Clients should be referred to the Insurance Monitor’s website.
Fels notes that the the monitor has started an active and comprehensive monitoring program and is responding to consumer/policyholder concerns.