Move to tighten rules on insurers

MAJOR insurers would no longer be able to jack up home and car insurance premiums without telling customers how much more they will pay and why.

After a decade of massive hikes, Treasury is considering forcing insurers to include the previous year’s premium on renewal notices and explain what has changed to make their policy more expensive.

It comes after a UK trial of a similar scheme found that simply including last year’s premium prompted 18 per cent more people to either switch insurers or negotiate a better deal.

Financial Services Minister Kelly O’Dwyer said the current disclosure rules hindered competition and “makes it difficult for consumers to understand their insurance”.

Home insurance premiums have increased at more than double the rate of average incomes but there has been little explanation from the industry about why policies are becoming so much more expensive.

“The government is committed to examining reforms to enhance disclosure practices and consumer protections and to consult on proposals to apply unfair contract terms to contracts of insurance,” Ms O’Dwyer said.

“The government looks forward to working with the industry on these reforms as it has an important role in improving the information they provide to consumers.”

The move is backed by consumer advocacy group Choice and the Australian Securities & Investments Commission.

An ASIC spokeswoman said there was merit in considering the change, and that the regulator would offer its assistance to Treasury.

A Senate inquiry into the insurance industry last year found home insurance premiums had risen by an average 8.3 per cent every year for 15 years to 2016, while the average annual wage growth in that time was 3.4 per cent.

It also found most of the market is dominated by brands ultimately controlled by just two companies – Suncorp and Insurance Australia Group.

The Consumer Action Law Centre told that inquiry, which concluded at the end of last year, that the insurance industry was “characterised by a vast range of policies which include varied conditions, inclusions, exclusions and definitions”.

“Policies are not consistent and do not conform to a minimum standard,” they said.