A key function of the Insurance Monitor is to ensure insurers do not collect more ESL from policyholders than they are required to pay to the NSW Government to fund the fire and emergency services.
In total, $14.7million was found to have been over-collected by a total of 124 insurance companies. Despite these over-collections, insurers appear to have generally been mindful of their obligations under the Monitor's Guidelines, and as a whole collected approximately $60 million and $12.5 million less ESL (under-collected) than they were required to contribute to the NSW Government in round 1 and round 2 respectively.
The Monitor investigated and assessed individual insurance companies' ESL collections relative to their contribution requirements over two 2-year periods (financial years 2015-16 and 2016-17 combined (round 1) and financial years 2017-18 and 2018-19 combined (round 2)). Where insurers were found to have collected more ESL (over-collected) than they contributed to government they are required to repay this amount.
Guidelines were published by the Monitor and insurers made aware of the Monitor's approach to the investigation and resolution of over-collection of ESL amounts.
Where practicable, over-collected amounts are returned to policyholders, however, when the Monitor agrees that this is not practicable, the funds are provided to the Chief Commissioner to be off-set against future ESL requirements.
Calculation of ESL relies on a number of inputs that must be estimated. Therefore, an over-collection of ESL may occur inadvertently, and is not necessarily regarded as price exploitation. However, the Monitor may take a different view if insurers are unwilling to repay over collected amounts.
ESL over-collected during the final 2 years of the scheme round 1 (2015-16 and 2016-17 combined) and the ‘transition period’round 2 (2017-18 and 2018-19 combined).
|Instrument||No. of companies||No. Policyholders refunded||Amount refunded to policyholders||Amount to Chief Commissioner||Total|
|Round 1- Refund undertakings||32||2,102||$954,640||$1,065,707||$2,031,587|
|Round 1 - Referred for debt recovery||5||n/a||n/a||$11,239||$11,239|
|Round 2 - refund undertakings||83 (+4 resolved prior to RU)||24,332||$1,636,545||$11,069,562||$12,706,117|
|Round 2- Referred for debt recovery||0||n/a||n/a||n/a||n/a|
Assessment and objections
The Monitor issues an assessment to each insurer found to have an over-collection amount.
Where insurance companies do not accept the Monitor’s assessment, the Act provides insurers may object to the Monitor’s assessment and may do so on one occasion only. Insurers were informed of their right to object to an assessment as part of the assessment process.
Initial assessments of over-collection amounts were determined by the Director supported by Legal Counsel and other staff. Appeals against any initial assessment were reviewed by the Deputy Monitor to ensure separation of the appeal determinations from the initial decision maker in line with best practice.
The terms and conditions under which an insurer is required to settle over-collection amounts are set out in a Refund Undertaking. If breached, refund undertakings are enforceable by the Monitor in the New South Wales Supreme Court.
A refund undertaking register is available on this website