
This is something that’s come up quite a lot over the past 6 to 12 months, particularly with the cost-of-living pressures we’re seeing in Australia and the general rise in premiums across the sector. People often want to know, “When can AFCA actually step in on a premium increase complaint?”
The starting point is that AFCA only has limited jurisdiction to consider disputes about premiums. Our rules – specifically rule C.1.2 – make it clear that we cannot consider complaints just because someone is unhappy with the premium amount or the size of an increase.
We’re not a pricing regulator, so we don’t weigh in on the fairness of a premium or how insurers underwrite or rate risks.
However, there are exceptions where we can step in. The main ones are:
- If there’s an allegation of non-disclosure or failure to disclose something relevant to the premium.
- If there’s an allegation of misrepresentation – for example, if someone was told their premium wouldn’t go up by more than a certain amount, or they’d continue to receive certain discounts, but that didn’t happen.
If there’s been an incorrect application of the premium – which is probably the most common exception we see. This might involve errors such as not applying a no-claims discount, using incorrect claims history, or failing to provide a logical explanation for a large increase.
Finally, if there’s a breach of the law, though in practice we see that used very rarely.
It’s important to note that for jurisdiction to be triggered, the complainant only needs to raise an allegation falling into one of these exceptions – they don’t have to prove it at the outset. Our role is then to investigate and determine whether that allegation is substantiated.
Communication is key
For example, we recently had a home and contents insurance complaint where a customer experienced a 60% premium increase on renewal. The insurer said the property was rated very high for bushfire risk, with an additional increase in the fire services levy.
But what was missing was any explanation about whether that bushfire rating had actually changed from the previous year.
In other words, if the property had always been rated very high, why was there such a sharp jump in premium now? The insurer couldn’t provide a clear explanation of what had changed in their risk assessment to justify that increase.
Ultimately, our decision maker found that there had been an incorrect application of the premium because of this missing explanation. The remedy in that case was to cap the increase to align more closely with previous years, rather than accepting the full 60% jump.
So, to summarise in simple terms: AFCA will weigh in on a premium complaint when it involves non-disclosure, misrepresentation, an incorrect application of the premium, or a breach of law.
We can’t step in just because someone feels the increase is unfair or too high in general – there needs to be one of these jurisdictional triggers for us to investigate and determine an appropriate remedy.
Attributable to Chris Liamos, AFCA Senior Ombudsman, Insurance
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