Public Inquiry to oversee proper removal of ESL
Insurance Monitor scrutinises property insurance policies.
In an effort to help protect New South Wales consumers amidst the abolition of the Emergency Services Levy (ESL), Australia's biggest insurers will be called upon to give evidence in a Public Inquiry into industry conduct, relating to any changes to property insurance policies.
The Inquiry will be led by ESL Insurance Monitor Professor Allan Fels and will focus on the ways in which insurers will pass on cost savings to consumers when the ESL is removed from policies on 1 July 2017.
Once removed, insurers must drop their property insurance prices by around 20%. For commercial policies, reductions are expected to be even higher, around 30%.
The outgoing levy will be replaced by an Emergency Services Property Levy.
However, research released by the Fire Brigade Employees' Union reveals these new charges could burden Sydney residents and business owners with higher costs and increased risks.
The research shows the new levy fails to factor in risks such as flood-prone homes, bushfire-prone areas or businesses working with high-risk chemicals, meaning that low-risk property owners will be forced to subsidise homeowners in higher risk areas.
The NSW government and the Insurance Monitor have promised to scrutinise any insurer significantly increasing base premiums following the removal and subsequent replacement of the ESL.
"Penalties of 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," Professor Fels said.
Fels also said effects on policies related 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," he said.
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