Insurance companies may need to explain rate hikes
The Treasury is considering rules that would keep customers more informed.
After more than a decade of increasing premiums, insurance companies may soon be required to be more transparent about the practice.
As part of a multi-pronged approach to exert downward pressure on skyrocketing premiums, The Treasury is considering measures that would require insurers to disclose to customers why their rates are increasing and by how much.
This was just one of the recommendations that resulted from last year’s Senate Inquiry into the insurance industry. Other recommendations include reforming the General Insurance Code of Practice, extending the unfair contract term provisions to include insurance contracts and developing new ways to improve customer literacy via the Securities and Investments Commission.
Home insurance is responsible for the steepest rate increases. The Senate’s report found that home insurance premiums have increased at an average rate of 8.3% per year since 2001, well above the 3.4% average yearly increase in wages over the same time period.
The report acknowledges that a spate of extreme weather events, especially in Northern Queensland, is a major factor in these increases. However, the report also states that consumers should be made aware of this.
“...the committee is concerned that consumers are unable to determine if premium increases have been driven by this increased risk alone, or whether other factors, such as a lack of competition, have also contributed to the premium rises,” the report states.
If The Treasury has its way, consumers will soon find out. The rules would not only cover home insurance but other forms of insurance as well, including car insurance and strata insurance.
If you think you are overpaying for home insurance, there are steps you can take to reduce your bill without waiting for The Treasury to take action. These include having your contents and property assessed, making your home disaster resistant, comparing quotes from multiple providers and paying your premium annually.
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