Emergency services levy (ESL) rates on NSW property insurance policies have fallen to about 7% this month from 20% in January, as the market transitions to removal of the charge.

“The benefits of the ESL reform are already being experienced in advance of July 1 for people who are renewing their policies or taking out a new policy,” ESL Insurance Monitor Allan Fels said.

Insurers are under pressure to ensure savings are fully passed on when the levy is instead collected alongside council rates from July.

Professor Fels told a public inquiry last week that insurers will be required to include the previous year’s premium on renewal notices – a move favoured by consumer groups and already introduced by IAG.

“It is now time the whole industry did the same,” Professor Fels said.

IAG, Suncorp, QBE, Allianz and CommInsure gave evidence to the inquiry last week. The Insurance Council of Australia (ICA) provided a submission.

“The imminent removal of the ESL from premiums will help improve the affordability of insurance and lower the levels of underinsurance in NSW,” ICA CEO Rob Whelan said. “All savings attributable to ESL removal will be passed on.

“Normal commercial factors remain that may affect final premium prices next financial year.”

NSW home and contents premiums grew an average of 5.5% a year from 2004 to last year, but in the past three years increased only 1.4% a year, insurers told the inquiry. Annual claims increased an average of 7.1% between 2004 and last year, while the average sum insured gained 4.5%.

Insurers said the industry is highly competitive and prudentially sound, but has experienced a deterioration in financial performance in recent years.

Total net profit last year was down 29% on the longer-term average, ICA says.