$15 million recovered from insurers by ESL Insurance Monitor Prof Fels

Emergency Services Levy Insurance Monitor

$15 million recovered from insurers by ESL Insurance Monitor Prof Fels, as Monitor ceases on 30 June

Almost $15 million in over-collected ESL by insurance companies over the last four years has been recovered by the office of the Emergency Services Levy Insurance Monitor, led by Professor Allan Fels and Dr David Cousins, with most of the over-collection occurring in the last financial year.

After four years of operation, the NSW Emergency Services Levy Insurance Monitor will formally cease on 30 June 2020.

“Our over-collection monitoring activities have highlighted many weaknesses with the emergency services funding system and the need for a framework for consumer protections as insurers continue to collect ESL,” said Prof Fels.

“Without the Monitor’s scrutiny, policyholders would have paid nearly $15 million more in ESL over the four years.”

Prof Fels said an important achievement for consumers during the Monitor’s term was at risk of being undone – a requirement that insurers include the previous year’s premium amount when issuing renewal notices to customers.

“This change ensured price movements were easily identified and was well received by consumers in NSW and beyond.

“It is unclear whether insurers will continue to provide the price comparison information after the Monitor’s office closes, and history indicates a reliance on the industry’s own Code of Practice will not be adequate.”

Research revealed that different insurers charge significantly different prices to provide insurance cover for the same home, and that on average, premiums paid by customers who renew their policies are between 25% and 30% higher than those paid by new customers.

The Emergency Services Levy Insurance Monitor ceases on 30 June 2020 when the legislation establishing it – the Emergency Services Levy Insurance Monitor Act 2016 – is repealed from 1 July 2020.

The Monitor’s role was to protect consumers from the potential for insurers to charge excessive premiums in response to the emergency services levy reform, including not collecting more ESL than they were required to contribute to the funding of fire and emergency services.

The intention of the reform was to shift the funding of NSW fire and emergency services to a property-based funding model by 1 July 2017. However, the reform was deferred shortly before this change was to occur, and the insurance-based funding scheme remains in place.

Through home insurance premiums, insurance companies will continue to collect over 70 per cent of the total budget for Fire and Rescue NSW, NSW Rural Fire Service and the NSW State Emergency Service.

The 16 quarterly reports of the Monitor provide a detailed record of the activities of the Monitor’s office over the four years of operation.

/Public Release.