NSW Emergency Services Levy Insurance Monitor Allan Fels has attracted industry criticism after saying wide price differences for home cover suggest competition is deficient and providers are making it difficult for consumers to compare policies.
The Insurance Council of Australia (ICA) says price divergence reflects policy variations in a highly competitive market, while the industry is taking steps to look at comparability options.
“Professor Fels would have much stronger grounds to be concerned if all premiums were the same,” ICA CEO Rob Whelan said.
The monitor collected pricing data as part of its role ensuring the emergency services levy (ESL) is correctly removed from insurance policies from July 1 in NSW.
The data reveals an average difference of up to $1100 for basic home and contents policies when comparing quotes for identical properties across 11 suburbs.
The difference between the cheapest and most expensive quote in Medlow Bath, in the Blue Mountains, is almost $1700, with one insurer quoting a price more than 2.5 times higher than another.
“Different suburbs have different characteristics and you would expect to see price differences across locations,” Professor Fels said. “But it’s very concerning there are such big differences in prices quoted for the same property. It suggests competition is not fully effective in this industry.”
Professor Fels says insurers are “ignoring calls” to list last year’s policy costs on renewal notices and have been “very quick to oppose” independent home insurance comparison websites.
Mr Whelan says policies offer varying inclusions and exclusions, with different limits, while some are for total replacement and others for agreed value.
ICA has reiterated widespread concerns, including among regulators, about price comparison websites and says it will this year conduct an industry review of product comparability options.
ESL Insurance Monitor guidelines on providing previous-year prices were released last September.
“Despite the short timeframe and having to operate without full knowledge of the ESL legislation, which is yet to be passed by the NSW Parliament, insurers are exploring the feasibility of doing so within the constraints of their technology,” Mr Whelan said.
Two insurers have committed to the disclosure as part of a trial and ICA is helping to share information across the industry around the impact on consumer behaviour.
“If the trials result in positive consumer outcomes, wider implementation of this disclosure can be encouraged,” Mr Whelan said.