Australians still being overcharged for home and vehicle insurance

Economy

Australians are still being subjected to significant breaches of the general insurance Code of Practice, including over-charging for common policies such as motor vehicle and home insurance.

The 2021-22 Annual Report of the General Insurance Code Governance Committee, which oversees the General Insurance Code of Practice, received 116 significant breach reports in the 2021–22 financial year, from 57 during the previous financial year.

Many were related to pricing errors, such as failing to apply discounts to premiums on motor vehicle and home insurance.

Consumers need to check their premiums after some insurers were found to be over-charging Credit:iStock

Chair of the Governance Committee, Veronique Ingram, says the rise in significant breaches of code sections covering the sales process or buying insurance is “concerning”.

“Overcharging [of] premiums is harmful to consumers and insurers should be doing more to prevent this,” Ingram says. “The onus lies with the insurers because these types of errors are not easily identified by customers.”

Insurers provide the difference in premium compared with last year on renewal notices for home and contents, and for car insurance.

Ingram says after the Australian Securities and Investments Commission (ASIC) asked insurers in October 2021 to review their pricing systems and controls to ensure consumers get the full discounts they are promised, the Governance Committee was expecting a rise in the number of significant breaches.

“However, the level and duration of significant breaches directly related to pricing promises surpassed what we had anticipated,” Ingram says.

Overcharging has a long history. In early 2018, the royal commission into misconduct in financial services asked financial services companies to confess their misconduct going back 10 years.

Among the more common confessions of the general insurers was overcharging of customers.

That could include not applying the advertised discounts to premiums, such as a no-claims discount, loyalty discount or multi-policy discount.

These are the same problems reported as significant breaches of the Code that are highlighted by the Governance Committee.

The original Code was introduced by the Insurance Council of Australia (ICA) in 1994, and has been updated since. It is a voluntary Code; though members of the ICA that have insurance products covered by the Code must adopt it.

Prue Monument, the general manager of compliance with the Code, says consumers should not just renew their policies without reviewing the renewal documents to make sure they are getting the correct price.

“Don’t assume that the pricing is always right – as we’ve seen many times over, there can be errors,” she says. “Make sure you are clear on the discounts that you are entitled to and [that] you’re clear on how they are being applied to your policies.”

If a consumer has a complaint, they should first raise it with the insurer. If the consumer is not satisfied with the outcome of their enquiries with the insurer, they should contact the free complaints service, the Australian Financial Complaints Authority.

The cost of insurance has risen as much as 15 per cent for some insurers thanks to rising inflation and more frequent intense weather events caused by climate change.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.


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