Allan Fels makes insurers put last year’s premium on renewal notice and it could save you 27%

It’s the information insurers didn’t want you to have when considering whether to renew a policy. Now you will — and it could save you big time.

Exclusive: For the first time insurance customers will be able to see in black and white just how much they are being gouged.

After a five-year fight by the nation’s most respected consumer crusader Allan Fels, from next week renewal notices for car and home cover will include last year’s cost, exposing a so-called “loyalty tax”.

Professor Fels, who was the first chief of the Australian Competition and Consumer Commission, has found existing policyholders pay 27 per cent more than new customers.

When the United Kingdom made insurers put the previous price on renewals it triggered a surge in the number of people seeking a better deal from their existing provider or a competitor.

Professor Allan Fels has fought long and hard for the change. Picture: Ray Strange

“It’s a really big national reform,” Prof Fels told News Corp Australia.

He said the transparency measure could be applied to other products, estimating that across insurance, banking and telecommunications the size of the loyalty tax could be as much as $3.7 billion a year.

Prof Fels first began pushing for the disclosure following his 2013 appointment as Victoria’s fire services levy monitor.

But he and his deputy Professor David Cousins couldn’t get the change in place before their roles ended two years later.

“We ran into a wall of resistance from the insurers,” Prof Fels said.

The duo were then given similar monitor duties in NSW and met the same attitude from the industry.

And in 2017 a Senate inquiry recommended such a reform. But it has yet to happen.

The change was put to then Financial Services Minister Kelly O’Dwyer in 2017. Picture: Kym Smith

“So we finally decided to exercise our legislative powers to force the disclosure,” Prof Fels said.

While the change is only mandatory in NSW, the four largest insurers — IAG, Suncorp, Allianz and QBE — are among those adopting it nationally. Allianz and IAG said they had made the move before the July 1 deadline.

“We support the Monitor in believing that insurance customers across the nation should have the benefit of seeing last year’s premium on their renewal notice,” an IAG spokeswoman said.

A Suncorp spokeswoman said it would also provide the percentage change in the premium.

Research by the UK’s Financial Conduct Authority in 2015 found that putting last year’s premium on renewal notices causes up to 18 per cent more consumers to switch or negotiate their home insurance policy.

In 2018, the British charity Citizens Advice lodged a “super complaint” with the nation’s Competition and Markets Authority that said consumers there were paying £4.1 billion ($7.4 billion) a year in loyalty taxes across insurance, mortgages, savings, mobile phones and broadband internet.

Prof Fels said the same would be true in Australia, noting our economy is half the size of the UK’s, according to the latest World Bank data.

He said governments state and federal should consider policy changes that would require previous price disclosures more generally.

“We believe the insurance action will put a lot more pressure on other products,” Prof Fels said.