Lifting the lid on home insurance price gouging

Insurance pricing is a "black box", and the industry has fought hard to keep it that way. It says comparison websites lead consumers to make bad choices because they are too focused on price and, if we all bought insurance based on price, it would be a disaster.

One of the industry’s least favourite people in recent years has been Professor Allan Fels, former boss of the Australian Competition and Consumer Commission and now NSW Emergency Services Levy Monitor. Before that, he held a similar residence in Victoria.

In these roles, Fels has lifted the lid on insurance price gouging.

In NSW, his team compared what 13 insurers charged across 11 locations on a monthly basis and then analysed the data.

Revelations include big differences between the cheapest and most expensive insurers, what new and old customers pay, and what people in different postcodes pay.

For example, the team unearthed the horrid statistic that new customers pay, on average, 27 per cent less than longstanding, loyal customers for home and contents insurance.

The team expanded its analysis beyond insurance, estimating that Australians pay $3.6 billion more than we should across a arrangement of household bills because of our loyalty.

Their final observe, obtained by The Sydney Morning Heraldand The Age, contains some real gobsmackers for anyone who does not shop around for home insurance.

• In Hornsby, NSW, for example, policyholders who switch from the most expensive premium to the average premium could save $470 a year, while those who switch from the highest to the lowest price quoted would save about $1200 a year.
• On average, the most expensive home insurance policy at each location tested is more than twice the price of the cheapest policy. In Hinton, NSW, the most expensive premium is more than six times the price of the cheapest available.
• CommInsure, QBE, NRMA and OnePath were consistently the most expensive insurers in the 11 postcodes tested in March, while Youi, Westpac, Woolies and Allianz were consistently the cheapest.

The data is all from NSW because that’s Fels’ current brief.

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However, in Victoria in 2013, he did a similar comparison across four postcodes and found the cheapest policies cost $264-$825 less than the most expensive over a year.

AAMI was the cheapest surveyed and RACV was the most expensive.

Sadly, this is the last time we will see such information.

Fels’ commission winds up this month, and the insurance "black box" will again be closed, leaving us to fend for ourselves.

The question for consumers is: If you are with one of the most expensive providers, how many thousands of extra dollars have you paid for the privilege over the years, and what extra value have they given you for it?

The question for governments is: Why does general insurance get a pass when it comes to price transparency and tracking? What differentiates these products from mortgage or telco plans?

Isn’t it time that all governments put something in place to make it easier for consumers to get better value for their insurance buck?

Joel Gibson is the author of KILL BILLS! The 9 Insider Tricks you Need to Win the War on Household Bills. Catch him on TODAY each Wednesday and on Twitter @joelgibson

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SRC: https://www.smh.com.au/money/planning-and-budgeting/lifting-the-lid-on-home-insurance-price-gouging-20200608-p550gn.html

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