The insurance industry has questioned the accuracy of claims by Allan Fels that companies charge 27% more for renewals than new business.

Professor Fels, the NSW Emergency Services Levy (ESL) Insurance Monitor, alleges in his latest quarterly report that insurers are imposing a “loyalty tax” on customers.

He says the average base premium for renewals in NSW is 27% higher than for new policies, alleging insurers exploit repeat customers while making generous offers to win new ones.

Industry insiders told insuranceNEWS.com.au the research shows a “lack of rigour”, claiming that data they are obliged to share with Professor Fels in his insurance monitor role is being used inappropriately.

The sources claim this data – which does not distinguish between renewals and new business – was compared with quotes from online comparators, which do not cover the whole market.

Despite calls from insuranceNEWS.com.au to Professor Fels’ representatives, no details were provided as to how the 27% figure was arrived at.

In Professor Fels’ latest press release, NSW Innovation and Better Regulation Minister Matt Kean says the premium differences are “simply unacceptable”.

“Loyal customers should be rewarded, not ripped off by their insurance providers,” he said.

Professor Fels says shopping around is the best course of action for consumers.

“This really translates to a simple message for consumers: don’t assume you are getting the best deal with your renewals,” he said. “Always check the prices of other suppliers, and if your insurer is out of line, go elsewhere.”

He says the discrepancies support his push to make all insurers publish policyholders’ prior-year premiums on renewal notices, to “promote greater pricing transparency and encourage consumers to question the price they are being offered to renew”.

It follows similar action in the UK, where the Financial Conduct Authority last year mandated prior-year premium reminders. In NSW Professor Fels has told insurers they must show prior-year premiums on renewal notices by July 1 next year.

Rather than a “loyalty tax”, the industry paints an alternative picture of a “new customer discount” that encourages people to shop around and lifts competition.

The Insurance Council of Australia told insuranceNEWS.com.au it has not been shown the data or research and has no way of verifying Professor Fels’ conclusions.

“Premiums differ between new policies and renewals for many reasons,” a spokesman said.

“Insurers may offer discounts to new customers to attract new business and increase market share. This is competition in action and may encourage consumers to compare the value of products in the market, and increase the affordability of insurance for some customers.”

Professor Fels was engaged to oversee removal of NSW’s ESL in 2016, before the State Government backflipped last year on plans to shift from the insurance tax to a property-based charge.

Post-backflip, he oversees insurers’ renewed application of the ESL, to ensure there is no overcollection.

The monitor’s latest data shows insurers overcollected ESL by $1.77 million in the 2016 financial year and undercollected by $61.47 million in the 2017 financial year.

Professor Fels’ report says ESL rates fell in the September quarter, “but some customers continued to experience increases… compared to last year due to the re-establishing of ESL rates by insurers occurring at various stages”.

It notes he has “substantially completed” his investigation of insurance companies that overcollected ESL in the 2016 and 2017 financial years.

“Investigations for an additional 17 companies were completed during the quarter, taking the total number of completed company investigations to 159.”

At the end of the September quarter 31 refund undertakings representing almost $1.5 million had been accepted.