In his latest quarterly report as NSW Emergency Services Levy Insurance Monitor to NSW Treasurer Dominic Perrottet, Professor Allan Fels highlighted the big differences in home insurance prices and called for greater transparency.
Wide variance in home insurance prices
The report found an average difference of up to $1,100/year for “basic” home and contents policies when comparing quotes for identical properties across 11 NSW suburbs.
In one suburb, Medlow Bath, the difference between the cheapest and most expensive quote was almost $1,700/year after one insurer quoted a premium that was more than 2.5 times the price of another.
Professor Fels said it is “very concerning there are such big differences in prices quoted for the same property”.
“It suggests that competition is not fully effective in this industry,” he said.
Insurance Council of Australia Chief Executive Rob Whelan told Australian Associated Press that Professor Fels’ comparisons are “misleading”.
“Each insurer’s policy is different. They offer varying inclusions and exclusions, with different limits,” Whelan said.
“Further, several insurers quoted offer total replacement, which usually has a higher premium, while most insure for agreed value.
“Professor Fels would have much stronger grounds to be concerned if all premiums were the same.”
Most consumers “miss out” on savings by not shopping around
Professor Fels said consumers can save hundreds of dollars by shopping around each time before they renew their home insurance policy, but added that “evidence shows most don’t, and miss out on savings”.
“Often cheaper prices are only available to new customers, and consumers shouldn’t assume a cheaper price this year will be the same next year,” Fels said.
Professor Fels also criticised Australian insurers for “ignoring calls to list last year’s policy cost in their renewal insurance notices”.
This is a measure that has been adopted in the UK, where from April 2017, it will be mandatory for general insurers to provide the previous year’s premium on their renewal letters.
“Insurers don’t make it easy for consumers to compare previous years’ insurance costs,” Fels said.
Mr Whelan said the Insurance Council is currently “exploring the feasibility” of disclosing the previous year’s premiums, with trials underway.
NSW home insurance premiums to fall by up to 20%
With the removal of the Emergency Services Levy from insurance prices after 1 July 2017, Professor Fels said residential property insurance prices must drop by up to 20% on average.
“The Insurance Monitor has been set up to make sure insurers do the right thing when the levy is removed, and drop insurance prices,” Fels said.
“Penalties [of] up to $10 million may apply to insurers who charge unreasonably high prices or engage in false or misleading conduct with the removal of the Emergency Services Levy.”