In a joint letter to all life insurance companies , APRA and ASIC have laid out concerns about recent premiums increases for retail life insurance policies.

Prompted by consumer complaints and reportable situations, the regulators were concerned that premium increases may not have been applied in accordance with policy terms or with reasonable expectations based on disclosure and marketing material.  Level premiums were particularly highlighted.

ASIC and APRA require that insurers have in place effective systems, processes and controls to ensure that:

  • Clear and effective disclosure takes place
  • All premium changes comply with the contract between insurer and consumer
  • Marketing materials are not misleading
  • Insurers comply with their legal duty to act efficiently, honestly and fairly

ASIC and APRA have asked life insurance companies to review past increases, including for legacy policies, to ascertain if these were in accordance with the applicable policy terms and determine if policyholders were provided with sufficient clarity about how premiums may change over the life of the policy.

ASIC requested all life insurance companies to respond with the findings of their review of past premium increases and any steps which need to be taken by 31st March 2023.

With regard to future product design the regulators have highlighted their expectation that sustainable products need to provide policyholders with reasonable premium stability.  Insurers were asked to report on how they propose to meet these expectations in future product offerings.

ASIC indicated that it will be discussing the responses it receives with insurers in April and May 2023.