Government needs to rein in poor insurance pricing practices
Consumers expect more from their insurers when it comes to pricing explanations. The Financial Rights Legal Centre, Consumer Action Law Centre, Financial Counselling Australia and CHOICE support the Australian Securities and Investments Commission’s (ASIC) calls for greater transparency in motor vehicle insurance premiums.
ASIC’s report 838 (Road testing transparency in car insurance premiums) released today makes it clear that as insurance costs continue to rise consumers need clearer explanations and more transparent renewal information.
The report has revealed widespread failures by insurers to clearly explain rising motor vehicle insurance premiums. None of the insurers examined explained in quote or renewal documents the key factors affecting how a premium was calculated or why it had changed from the previous year. Consumer groups believe this raising serious questions about transparency, fairness and competition in a market already placing significant pressure on Australian households.
Financial Rights Legal Centre Principal External Relations and Advocacy, Julia Davis said “this report makes it clear that consumers are being left in the dark about some of the most important information affecting the cost of their car insurance.”
“ASIC has found that insurers are often providing little more than generic explanations, leaving consumers confused, frustrated and unable to make informed decisions about whether they are getting value for money.”
Consumer interviews conducted by ASIC as part of the review revealed widespread frustration, with many believing they were receiving higher premiums without adequate explanation or justification. These frustrations are echoed by people being supported by Financial Rights, Consumer Action, Financial Counselling and CHOICE.
The Federal Government committed in the May budget to develop an options paper to address issues of pricing transparency in insurance. This work currently being led by Treasury must lead to strong legal requirements on insurers to provide their customers with a breakdown of the key components of their premium and a tailored explanation of why their premium has increased.
Quote attributable to Meg Dalling, Assistant Director, Policy and Campaigns, Consumer Action Law Centre.
“Report 838 reveals that insurers continue to fail consumers by not providing all the information and tools they need to understand how their insurance premium, including any annual increase, has been calculated. This information is a critical input into family budgeting decisions as it allows people to consider options for saving money – so important in a cost-of-living crisis when every dollar counts.
“The glaring lack of transparency around the surging price of premiums and hidden costs entrenches a power and information imbalance that overwhelmingly favours the insurer. This is simply unfair, and if they knew, consumers would find this conduct unacceptable.”
Quote attributable to Louise Hayes, Coordinator, Disaster Recovery, Financial Counselling Australia
“Hidden costs and poor disclosure mean that many consumers are being penalised for paying for their car insurance monthly instead of in a single annual payment. Worst of all, insurers are not clearly highlighting these additional costs or the savings available through annual payments. Those paying monthly are paying a poverty premium”
Quote attributable to Morgan Campbell, Head of Policy and Government Relations, CHOICE
“CHOICE’s nationally representative survey data shows that 77% of Australians are concerned about the cost of car insurance. That’s no surprise – premiums keep going up but consumers aren’t being told why.”
Background
ASIC’s review covered documents from five insurers operating eight insurance brands representing approximately 72 per cent of Australia’s retail motor vehicle insurance market. The regulator also surveyed more than 2,000 consumers and conducted in-depth consumer interviews. The review examined comprehensive motor vehicle insurance, third-party property damage insurance, and third-party fire and theft insurance.
ENDS
Media contact: Mark Pearce, mark@consumeraction.org.au Tel: 0413 299 567
