Australia’s largest insurance companies will be compelled to provide evidence to a Public Inquiry into conduct in the insurance industry ahead of the abolition of the Emergency Services Levy (ESL) from property insurance policies after 1 July 2017.
The Inquiry will focus on how insurers will ensure they pass on cost savings to consumers when the ESL is removed from insurance policies. The Insurance Monitor, Professor Allan Fels AO, called the independent Public Inquiry as a measure to safeguard NSW consumers.
“Insurance companies need to pass on costs associated with the ESL’s removal in full to policyholders,” Fels said.
“Penalties up to $10 million apply to insurance companies who engage in prohibited conduct such as price exploitation, false or misleading conduct – for example not disclosing full details to policyholders – or not passing on the full cost savings that policyholders are entitled to.
“The removal of NSW emergency services funding from insurance policies is not to be taken as an opportunity for insurers to pocket reductions.
“Many hardworking NSW families are struggling, and they are entitled to the full costs associated with the levy’s removal from their insurers.
“The Inquiry will examine other drivers affecting insurance costs such as industry competition, pricing and other productivity improvements.
“The removal of the ESL should not be used to restore or increase insurer profit margins. Effects on polices due to recent catastrophic weather events will also be investigated.
“Insurers will be required to explain how such factors may impact on future premiums, particularly where they coincide with the removal of the ESL.”
Fels said his office had been closely monitoring insurers and responding to issues raised by policyholders in their communications with their insurers.
“The Public Inquiry is further assurance to NSW consumers that insurance companies are on notice. We are watching and monitoring a range of different factors to ensure consumers are protected during this transition,” Fels said.
“I have called the Inquiry to help increase transparency over the pricing of premiums. It’s only reasonable consumers know how their policies are priced and what affects this cost so they are able to make informed decisions.”
Insurance companies including Insurance Australia Group (includes Coles, NRMA and Insurance Manufactures Australia), Allianz Australia, QBE Insurance (includes Elders Insurance) and Suncorp are expected to present at the Inquiry.
NSW brokers have also been warned late last year against providing false information on the abolition of the state’s emergency services levy (ESL).
From 1 July insurers must drop their property insurance prices by around 20 per cent when the NSW government removes emergency services funding from home insurance policies. For commercial policies, the reductions are expected to be even higher, around 30 per cent.
Public Inquiry details:
The Public Inquiry will be held from 9.30am, Tuesday 16 May 2017, at the Theatrette, Parliament House, 6 Macquarie Street Sydney. The Inquiry will be led by Insurance Monitor Professor Allan Fels AO and Deputy Insurance Monitor Professor David Cousins AM. Further details are available from the Insurance Monitor website. The Monitor has also included a new section on its website specifically for insurance industry participants.