Property insurance prices in NSW are dropping in anticipation of the removal of Emergency Services Levy (ESL) from insurance policies on 1 July 2017.
Insurance monitor Professor Allan Fels AO said insurance companies are phasing out the ESL ahead of the levy's abolition in five weeks' time.
“The ESL charged on NSW property insurance has been declining,” Fels said. “When looking across 12 insurers, ESL rates declined from around 20% in January to around 7% in May 2017, for people purchasing now this signals a decline of 13 percentage points.
“I expect to see further significant reductions in premiums in the period leading up to 1 July 2017 as ESL rates continue the process of falling to zero.”
Data acquired by the insurance monitor from the Australian Bureau of Statistics (ABS) show that insurance prices dropped by almost 3% in this year's March quarter in Sydney, but collectively rose in all other capital cities by around 1%, confirming the benefits to Sydney-siders.
The ABS data looks at the total amount a customer paid for a new or renewed house and contents policy.
“In short, the benefits of the ESL reform are already being experienced in advance of 1 July 2017 for people who are currently renewing their policies or taking out a new policy,” Fels said.
“The Insurance Monitor has released data relating to standard property insurance quotes across 11 areas in NSW, covering 12 insurers. It shows property insurance quotes have decreased across all 11 locations covered by the survey since it commenced in October 2016.”
Fels said there are continuing large differences in premium quotes for the same property in the same location depending on the insurer – indicating the importance of shopping around for policies.
“In Bradbury (South West Sydney), for example, it could cost almost 2.5 times higher depending on who you insure with – that could be a saving of over $1,500,” he said.
Fels also noted a significant fall in quotations from October 2016 to May 2017.
“Premium falls up to May 2017 do not reflect the full fall to zero in ESL that will occur from 1 July 2017. Further, but smaller, falls for these policyholders, will occur in the last quarter of the 2018 financial year,” Fels said.
Effective 1 July, the funding for the NSW emergency services will be sourced, not from property insurance policies, but from all property owners, to be collected alongside council rates.
Non-compliance by insurers could incur them penalties of up to $10m.
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