Home / Regulatory & Government / Insurance ‘loyalty tax’ rises to 34%, says Fels
22 July 2019
NSW Emergency Services Levy Insurance Monitor Allan Fels says recent research shows that, on average, customers renewing their insurance policy pay 34% more than new customers.
Writing on The Conversation website, Professor Fels says discounts are unfair if the cost is not passed on to loyal customers.
“It discriminates against people who do not or cannot easily switch to another supplier,” he says.
“Vulnerable consumers – elderly consumers, those on low incomes, low education, or those with a disability – are disproportionately affected.”
Professor Fels has also warned insurers against over-collection of the Emergency Services Levy (ESL), and sent guidelines to the industry.
He says in the event of over-collection, refunds to policyholders will be required, or if this is not practicable funds should be returned to the Chief Commissioner of State Revenue.
“While over-collection may be inadvertent, this does not relieve insurers of the requirement to make good on any over-collection amount,” he said.
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.
Last year it made an official complaint to the NSW Government, asking Treasurer Dominic Perrottet to pull Professor Fels into line.
The Monitor was appointed to ensure savings were passed on to customers under a scheme to replace the NSW levy with a broad-based property tax. After the reform program was suddenly ditched two years ago, Professor Fels retained his position to oversee the return to the old system.