The Australian Financial Complaints Authority (AFCA) says the term ‘level’ premium is confusing for life insurance policyholders, leading many to believe the premiums they pay will not change.
But that has not been the case in recent years as life insurers have adjusted their rates, leading to increased complaints about rising premiums filed with the AFCA.
Chief ombudsman Vicki Carter says disputes over premium increases make up a “large portion” of life insurance complaints that are received.
“There have been two main drivers: flat premium increases and revised life insurance premium rates over the past few years,” Ms. Carter told a recent AFCA members’ forum. “It is obvious that many complainants do not understand or at least do not understand that level premiums can increase.
“Although the word ‘tier’ is used industry-wide to describe non-tiered premiums, it can, and does, without a good explanation, lead consumers to a false sense of security about future increases. .”
She says finding a “more appropriate” term to replace the word “tier” will help reduce the number of complaints insurers and the AFCA receive when “tier” premium policies are repriced.
Ms Carter says the environment has been difficult for life insurers in recent years, forcing many to review their pricing structure.
“However, it is understandable that policyholders were taken by surprise when there had been no reassessment of premiums for some time,” Ms Carter said.
“And significant premium increases are now being implemented. We believe this industry could do better by disclosing the ability of insurers to revalue, especially level premium policies.
Chief Insurance Ombudsman Emma Curtis, who also presented at the forum, says income protection remains the most criticized product after funeral plans and incorrect premiums remain the most criticized issue.
She says insurers have resolved around a third of their complaints or 35% at the start of the registration and referral stage in the year 2021/22.
“And I encourage insurers to build on that to improve that number,” Ms Curtis said. “While this is a 3% increase over last year, there is plenty of opportunity to increase this.
“We welcome an early resolution at this point as long as the outcome is fair to both parties, as it is efficient and profitable for businesses and helps to take some of the anxiety and uncertainty out of business. plaintiffs.”