The NSW Emergency Services Levy Insurance Monitor, Professor Allan Fels, has revealed that consumers who renew a home and contents insurance policy with their existing insurer are paying more than new policyholders.
In his September quarterly report, the Monitor found the average base premium price of home and contents renewal policies to be 27% higher than that of new policies. He said the pricing penalises loyal customers. “This is what is referred to as a loyalty tax, where consumers are penalised for remaining with a company and their product,” Prof Fels said.
“It seems that like banks and energy companies, insurers count on the loyalty of existing customers to offer discounts to new ones.
“This really translates to a simple message for consumers – don’t assume you are getting the best deal with your renewals. Always check the prices of other suppliers, and if your insurer is out of line, go elsewhere.”
Professor Fels said requiring insurers to disclose the previous year’s premium price on renewal notices is one measure that will promote greater pricing transparency and encourage consumers to question the price they are being offered to renew. In NSW, the Insurance Monitor has told insurers that they must show last year’s premium on renewal notices by 1 July 2019.
“Insurers decide how much ESL they charge their policyholders. We are asking insurers to show their customers how much of their premium goes to the insurer and taxes, and how these charges change each year.” While the sum insured is generally higher with renewal policies, even after adjusting for this, renewals on average remain more expensive.
In his role as Insurance Monitor Professor Fels has the power to collect data to check that savings from the now-reversed abolition of the ESL are passed on to consumers.
Insurers are concerned that this data is now being used as a stick to beat them with, and that the comparisons made by Professor Fels are not valid.
Industry sources told insuranceNEWS.com.au the data they provide to him do not distinguish between renewals and new business, and that this was then compared with quotes from online comparators, which do not cover the whole market.