Push for insurers to reveal past premiums at renewal time gains senate committee support
A federal senate committee has stated that it is ”deeply concerned” by a lack of transparency in Australia’s $3.1 billion general insurance industry, and has implored the government to adopt a number of recommendations that would improve consistency and comparability between insurers.
In a report released on August 10, the committee outlined 15 recommendations aimed at making it easier for consumers to understand and compare home and car insurance policies, including the implementation of premiums from the previous year on product renewal certificates and a review of the effectiveness of Key Fact Sheets as a comparison tool.
A number of stakeholders, including consumer advocates CHOICE and regulator ASIC, had recommended the idea of introducing previous year premiums on renewal forms in their submissions to the committee, suggesting that when faced with an increased premium consumers would be more likely to shop around for a better deal.
The Financial Rights Legal Service called for even greater measures in their own submission - advocating for the introduction of an explanation by respective insurers on each renewal certificate in the event of a premium increase.
A 2014 study in the United Kingdom found that the inclusion of the premium figure from the previous year on renewal certificates prompted between 11% and 18% of consumers to either negotiate a better deals for themselves with their current insurer, or switch to a competitor.
The Insurance Council of Australia (ICA) has already launched a study of its own into the effectiveness of such an inclusion, with two insurers (including the NRMA) testing the policy.
While the ICA has stated that it would seek a broader implementation of the policy if there was a successful result in the trial for consumers, ASIC has stated that the government would need to legislate any changes to ensure industry-wide compliance.
The committee also recommended a review of Key Fact Sheets as a useful source of information - describing their lack of transparency as having a “detrimental effect” on the ability of consumers to effectively compare similar policies.
Potential changes to Key Fact Sheets would include the standardisation of terms and definitions across the insurance industry in order to make it clearer for consumers comparing policies.
There’s no doubt that wading through insurance jargon can be difficult at the best of times, which is why Mozo has made it easier by breaking down the key components of every policy for you. So if you’re looking to compare deals for your own house or valuables make sure you head over to the Mozo home insurance comparison hub.