Housing: Experts concerned over 'big differences' in same property insurance prices

AM By Jean Kennedy and Lucy Carter Posted 29 minutes ago Photo: There are stark differences in the cost of insurance for similar homes with similar risks, in the same suburb. (ABC News) Related Story: Morrison flags property investor crackdown, Medcraft warns on housing 'bubble' Related Story: 'Severely unaffordable': Sydney's housing nightmare laid bare in new survey Map: Concord 2137 A new report into house insurance premiums suggests a lack of competition in the industry is leading to some people being seriously overcharged because they do not shop around enough. Key points: Medlow Bath suburb has up to $1,700 difference Competition is not fully effective in the insurance industry, Professor David Cousins says When consumers shop around, that will affect the market price, Professor Cousins says Professor Allan Fels, the NSW Emergency Services Levy Insurance Monitor, and his team examined 11 suburbs across the state, comparing home and contents policies for different insurers. He said the differences they observed were huge. "A typical average quote, say for Randwick might be $1,674. But you can get them for identical properties for $1,062, that's over $600 cheaper," he said. "At the other end some people are paying $2,200 on identical properties." Deputy Insurance Monitor Professor David Cousins also said there were stark differences in the cost of insurance for similar homes with similar risks, in the same suburb. "In the case of Concord — an inner western Sydney suburb — the differences are around $800 to $900 between the most expensive and the cheapest premium," he said. "And in the Blue Mountains' suburb of Medlow Bath, the difference was more extreme, it was up to $1,700 difference. "So, what we're talking about here is a standard house with all the common features and obtaining a quote for that house for all of these major insurers, with the variation quite staggering. "Different suburbs have different characteristics, and you would expect to see price differences across locations. "But it's very concerning there are such big differences in prices quoted for the same property." He said it suggested competition was not fully effective in the insurance industry. Edge of a cliff? Housing in 2017 There are plenty of forecasts around the Australian housing market in 2017 - and few are positive. "The main reason is because consumers are not shopping around," he said. "There are plenty of insurance companies out there and plenty of alternatives for consumers but they need to check what prices other insurers are willing to offer, so they get the best price and create more competition. "When consumers do their shopping around and if they start to switch away from high-priced suppliers to the lower prices suppliers, then that will affect the market price. "It will sharpen up the insurers, they will start to think more carefully about the prices that they set and how they are going to be responded to by consumers and if people start to move away and renew fewer policies for example, they'll quickly get the message." Comparison websites 'needed' Professor Fels has called on insurers to be more transparent in two major ways. "We believe there should be independent home insurance comparison websites — insurers have opposed that," he said. "And we also believe that when [consumers] are notified of their insurance costs at their annual premiums they should be told what they paid last year. "Hardly any insurer tells them what they paid last year, your insurance note just arrives through the mail or the email and it's got a new price on it, but you're not told the old price." He said if insurers remained resistant to these measures, state and territory governments should step in. "I think if the industry doesn't do this, governments around Australia will have to consider doing something like that, to get the insurer to do what is obviously the right thing by consumers," Professor Fels said. "In the United Kingdom it will be, from April 1 this year, mandatory for insurers to provide the information about what was paid last year." Campbell Fuller, from the Insurance Council of Australia, said a number of major bodies like ASIC and APRA had issues with price comparison websites. "Price comparison websites force consumers, or encourage consumers to look only at the price of the product," he said. "And when every product is different it's simply unfair comparison." He said insurers were being encouraged to publish their previous years prices, but that it would take time. "Insurers were notified of that last September, it takes a long time to change computer processes," he said. "Insurers are looking at how best to do this before July 1 but it's going to be a hard process to do. We are looking very closely at other measures by which we can better inform consumers." Topics: government-and-politics, housing, concord-2137, medlow-bath-2780