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Firing back: ESL Monitor rejects ‘loyalty tax’ attack

January 23, 2019

The NSW Emergency Services Levy Insurance Monitor has fired back at the Insurance Council of Australia (ICA) over its claim that the organisation is exceeding its mandate.

Deputy Monitor David Cousins says the Monitor, Allan Fels, is acting fairly in calling for insurer data related to his claims that insurers impose a virtual “loyalty tax” on premiums paid by renewing customers.

Professor Cousins says in the Monitor’s website that ICA’s submission “makes a number of factually inaccurate points”.

ICA has suggested that Professor Fels is also stepping on the turf of other national processes in demanding the data. It says the discussion paper uses “seriously deficient” methodology and bases its analysis on data collected for a different purpose, without consulting the industry.

The monitor’s role was introduced to ensure consumers were not over-charged in the shift from an insurance-based ESL to a broader property tax levy starting in mid 2017. But the NSW Government halted the plan at the last minute, requiring insurers to reinstate the levy.

The monitor’s role, originally scheduled to end at the end of December is now continuing until June 30 next year.

Professor Cousins says there is little basis to suggest that the Monitor has overstated his mandate in looking at the loyalty tax issue, and that the work is not impeding any national actions.

“It is necessary for the Monitor to have regard to the effectiveness of competition in the property insurance industry as it is relevant in determining the most appropriate way to implement its monitoring program,” he says.

He says the Monitor is not obligated to consult on how data provided by insurers is analysed and has offered a consultation avenue on the loyalty tax issue by releasing a discussion paper.

“This step was undertaken to provide an opportunity for insurers to provide their perspective on the findings regarding the observed pricing gap, which would assist the Monitor in deciding on his next steps,” Professor Cousins says.

The letter also dismisses an ICA submission statement saying the discussion paper “conflates price differentiation, price discrimination and price exploitation”.

ICA has separately written to NSW Treasurer Dominic Perrottet to protest against Professor Fels’ increasing demands for data.

A new data order last year requires comparison pricing data for motor and commercial policies plus disclosure of fees to intermediaries, going beyond previous data gathering which focused on home and contents policies.
 

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