Home insurers failing to provide explanations for premium increases
A new report into home insurance premiums by CHOICE and Financial Rights Legal Centre (FRLC) has revealed a stark lack of pricing transparency across the industry, despite 77% of Australians reporting concerns around home insurance premium prices – up from 52% in 2020.
CHOICE and FRLC analysed 75 home insurance renewal notices submitted by homeowners and found premiums commonly increased by 10% to 20%, but 3 in 4 renewal notices provided no explanation for why an individual customer’s premium had gone up.
The report also found:
- 71% of policyholders did not understand why their premium had increased.
- 73% of policyholders felt the premium increase was unfair.
- None of the renewal notices provided personalised insights into how premiums were calculated.
- 92% of renewal notices did not include last year’s premium price on the first page for easy comparison.
“For consumers to make informed decisions and help identify risks, there needs to be greater pricing transparency. How can consumers invest in reducing their risk and their insurance costs if they don’t know how that risk is being assessed in the first place? Instead of incentivising consumers to make their homes more resilient to climate change, cheaper premiums are often only offered to new customers, or if you threaten to switch,” says CHOICE’s Head of Policy, Morgan Campbell.
“Insurers know more about the risks facing our homes than anyone else, yet consumers are routinely given a premium increase without any meaningful explanation of what’s driving it. We’re getting the signal, but not the information needed to respond to it,” says FRLC’s Principal of External Relations & Advocacy, Julia Davis.
When CHOICE conducted a nationally representative survey earlier this year asking consumers about their trust in home insurers, only 17% said they trusted their provider – the lowest figure since the survey began 11 years ago.
“It’s not surprising that trust in insurers is at a record low – homeowners are clearly frustrated with skyrocketing premium increases that arrive without clear justification. Many said their insurers relied on broad industry justifications or provided automated responses, rather than property-specific reasons for the price hike. This gives consumers very little agency over their insurance costs and gets us no closer to making existing homes more resilient to increasingly frequent and extreme weather events,” says Campbell.
“We’re calling for greater transparency across general insurance pricing. Consumers should have clear information about their premiums, including the calculations behind any price rise, risk assessments and what consumers can do to reduce their risk and their premium. We believe these actions will allow consumers to have more affordable and accessible insurance, ultimately rebuilding trust in the home insurance industry,” says Campbell.
“We are not calling for exhaustive explanations, rather the provision of enough information for a consumer to understand the factors that led to the price they are paying and how those factors may have changed at renewal,” says Davis.
Read the full report: https://drive.google.com/file/d/1jw_dJmKG_SmexzRUWWllwl5duNnUue2l/view?usp=sharing
