An industry expert has called for an overhaul of the way insurers across Australia provide information about premium prices, releasing a report that finds consumers are in the dark over how insurance companies arrive at their prices.
Professor Allan Fels, Victoria’s Fire Services Levy Monitor, is to release a report entitled Shining a Light
which has found that consumers taking out insurance are not provided with easily accessible information about what they are and are not covered for.
A spokeswoman told Insurance Business
that a copy of the report has been sent to the ICA and that the report will be brought to the attention of relevant federal regulators.
The report has found that insurers provide no information about whether consumers are assessed as low, medium, high, or very high risk for things like flood, bushfire and burglary, or given the reasons for premium price rises.
Professor Fels argued that informed consumers would bring about a more level playing field in insurance.
“Insurance companies in Australia are more profitable than banks and this suggests an absence of effective competition. One of the things that would help drive effective competition is for consumers to be better informed.”
The Monitor proposes a number of measures to improve transparency for consumers when taking out or renewing insurance, including requiring insurers to:
- Explain premium price changes when policies are up for renewal.
- Provide more accessible information about what consumers are covered for under a policy and what they are not covered for.
- Explain how they assess an individual’s risks like bushfire, flood and burglary – e.g. low, medium, high, very high risk.
- Clearly indicate any statutory charges (e.g. stamp duty, GST, fire services levy), detailing them separately to the basic premium cost in the quote or invoice.
- Explain what additional charges might be incurred as a result of choosing to pay insurance in instalments.
The Monitor has also called for mandatory short form product disclosure statements in insurance.
Read the full report here