ESL monitor warns insurers about raising premiums
Encouraging a smooth transition to a property-based levy.
The NSW government has promised to scrutinise any insurer significantly increasing base premiums following the removal of the Emergency Services Levy (ESL) next year.
Insurance companies have been put on notice by Emergency Services Levy Monitor, Professor Allan Fels, as part of his second quarterly report to the NSW government.
"The removal of the ESL must not be an opportunity for significant increases in base premiums. We will be subjecting the industry’s claims about premium rises to close scrutiny," Professor Fels said.
“The industry argues that increases in average claim size leads to rising premium costs.
“But there are other factors such as claim frequency and reinsurance which can have a positive or negative impact on the net cost per policy, and these will be carefully monitored.
“So far, we can see little evidence of an increase in the underlying cost of claims being experienced by insurers.”
Fels is responsible for overseeing the abolition of the insurance-based ESL, providing advice and guidance to consumers and industry during the transition to a property-based levy. The Emergency Services Property Levy will come into effect from 1 July 2017.
The levy has been estimated to cost $160 per year, although NSW Treasurer Gladys Berejiklian says annual premiums should drop by about $200, saving customers around $40 per year.
Residential property insurance customers tended to be less informed about the details of their policies than commercial customers, with around 30% automatically renewing their premiums each year. Fels' report also draws attention to an increase in consumer complaints, indicating insurance companies are providing inaccurate information to customers.
Last month, IAG was forced to refund more than 27,000 NRMA customers after it was found to have overcharged on the Emergency Services Levy (ESL) in 2013. Aussie insurers have a hard time satisfying customers but it's the banks that have been most heavily scrutinised following a string of ASIC-enforced retributions.
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