Loyalty doesn’t pay when it comes to property insurance
The NSW Emergency Services Levy Insurance Monitor (ESL), 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 per cent 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.
Minister for Better Regulation Matt Kean says the practice is unfair for hardworking NSW families.
“Loyal customers should be rewarded, not ripped off by their insurance providers,” Mr Kean said.
“We know some big businesses try to take advantage of customers by making it hard for them to change providers or get out of their contracts.
“This is simply unacceptable.”
The Monitor’s September Quarterly Report overall found that ESL rates fell in the September quarter, but some customers continued to experience increases in ESL compared to last year, due to the re-establishing of ESL rates by insurers occurring at various stages.
21 November 2018.