Transparency in Premiums: ACCC Highlights Importance of True Costs in Renewals
Transparency in Premiums: ACCC Highlights Importance of True Costs in Renewals
The ACCC argues that from a consumer's viewpoint, the final price settled last year is the pivotal piece of information. "Discounts or changes may be made to an initial quote for a range of reasons, but consumers want to know what their final bill is or was," a spokesperson explained exclusively to insuranceNEWS.com.au.
Recent reporting by insuranceNEWS.com.au, drawing on insights from an ABC investigation, underscored discrepancies at RACQ Insurance, where renewal notices referenced premiums before any discounts. This practice showcased a nominal 1.5% rise based on the initial quoted premium, contrasting sharply with a 39% spike when focused on the actual amount previously paid.
These findings emerge from the ACCC's Northern Australia insurance inquiry, which revealed gaps in consumer awareness about the precise amounts paid on policies. The inquiry also suggested that insurers should clearly communicate the past sums insured and any applicable excesses to enhance customer understanding regarding policy details and pricing dynamics.
Despite these recommendations being highlighted both in an interim and final ACCC report from 2020, the Federal Government has yet to formally respond. Meanwhile, the Insurance Council of Australia notes that displaying the past year’s premium alongside the renewal quote is already a requirement under the current insurance practice code.
This presentation of prior premiums, however, might omit adjustments or substantial discounts negotiated during the policy term, as indicated by an industry representative.
Responding to the ABC's findings, RACQ asserts they have not received prior criticisms regarding their communication strategy. Policyholders typically engage directly if they require further clarification. "We will, however, be reviewing this feedback to identify any opportunities to further clarify our messaging for members,” a spokesperson remarked.
On the regulatory front, the Australian Securities and Investments Commission (ASIC) has pledged to scrutinize renewal disclosures and inspect prevailing industry practices potentially impacting consumer transparency.
Consumer Action Law Centre CEO Stephanie Tonkin emphasized the risks of misleading pricing to the public. Stating they haven't heard of this practice directly from the people who call the helplines, but any misleading representation of actual savings and prices – similar to the kind of strategies supermarkets are being criticised for – is concerning, especially in the midst of a cost-of-living crisis.
Published:Wednesday, 6th Nov 2024
Source: Paige Estritori
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The process by which an insurer determines the risk of insuring a client and decides the terms of coverage.