Customers ‘deserve better’ on stepped premiums: AFCA
22 November 2021
“Many customers simply don’t understand how fast stepped premiums can increase and we think that is a big problem,” Mr Weinmann told the AFCA bi-annual member forum on Friday.
Insurers often simply say rate rises will increase with age, and tell consumers that rates are available on request, without providing more detailed explanations.
“What that really means is it is only going to be the most wary, the most diligent, the most persistent, or the least trusting of your potential customers who will find out the true rate of the increase,” he said. “We think all customers deserve better than that.”
Mr Weinmann says stepped premium increases are a feature of one in 16 complaints about life insurance that come to AFCA.
Clearer explanations are particularly needed given a lack of examples of other products designed to be held over time and with similar significant increases, he told the forum, while urging insurers to put themselves “in the shoes” of customers.
“We think that improvements in industry practice are necessary,” he said. “It is not an isolated problem, it is not a problem that afflicts only a couple of players in the industry. It is an industry-wide problem and we think it needs industry-wide action.”
AFCA has made submissions to the life code review saying the industry should commit to giving their customers much better information about stepped premium increases at the point of sale.
Mr Weinmann told the forum that price increases as a result of premium re-ratings are another major driver of complaints, while noting that AFCA does not have the mandate to decide what a fair premium should be.