NSW Emergency Services Levy Insurance Monitor Allan Fels has warned insurers against overcollection of the Emergency Services Levy (ESL).

Professor Fels says he has issued guidelines to the industry, and warns he will be “closely scrutinising insurers” to ensure consumers are not charged "excessive amounts".

“The guidelines send a clear warning to insurers that the Monitor will use its statutory information gathering powers to obtain all the data it needs to make these assessments,” he said.

“And we will require an auditors’ review report in relation to this data to ensure NSW consumers are not overcharged on their insurance.”

Professor Fels says in the event of over-collection, refunds to policy holders will be required, or if this is not practicable funds should be returned to the Chief Commissioner of State Revenue.

“Whilst over-collection may be inadvertent, this does not relieve insurers of the requirement to make good on any over-collection amount,” he said.

Mr Fels has also written a piece on The Conversation website, once again outlining his concerns over insurance “loyalty taxes”.

He says the most recent research shows that, on average, customers renewing their insurance policy pay 34% more than new customers.

“Discounting to win new customers is not fair if the costs of that discount are passed on to longstanding customers,” Professor Fels writes.

“It discriminates against people who do not or cannot easily switch to another supplier. Vulnerable consumers – elderly consumers, those on low incomes, low education, or those with a disability – are disproportionately affected.”

The Insurance Council of Australia denies that new customer discounts are a tax on loyalty, and believes Professor Fels regularly steps outside his remit and fails to listen to industry concerns.

The NSW levy was due to be replaced with a broad-based property tax, with the Monitor appointed to ensure savings were passed on to customers.

The reform was suddenly ditched following a Government u-turn two years ago, which cost the industry $40 million, but the Monitor remained in position and has regularly attacked insurers’ pricing mechanisms.