Australian life insurance policyholders have faced repeated double-digit increases in their premiums, prompting calls from the Financial Advice Association of Australia (FAAA) for life insurers to provide clear explanations for these rises.
In its submission to the ongoing independent review of the Life Insurance Code, the FAAA highlighted escalating premiums as a major concern, alongside the confusion caused by insurers offering upfront discounting on new policies.
The review, chaired by former Australian Securities and Investments Commission (ASIC) deputy chair Peter Kell, has been told that “over recent years, life insurance consumers in Australia have been subject to very significant premium increases on their life insurance policies.”
The association added: “This has involved repeated double-digit increases, which in many cases means that consumers are paying nearly double what they were just a few years ago.”
Life insurance, the FAAA noted, is a product where premiums naturally rise with age. However, large, unexpected price increases can place substantial pressure on household budgets, particularly for clients experiencing other financial challenges.
The FAAA stressed that premium sustainability is crucial, given the many factors influencing future policy costs. The association recommended better communication from insurers regarding anticipated medium-term premium adjustments and called for mechanisms to assess the accuracy of these projections.
“The ability to raise premiums is the primary lever available to life insurers. It must be exercised with caution, transparency, and accountability. Achieving greater premium sustainability is a core demand of life insurance clients and should be a priority for insurers,” the submission stated.
On the subject of upfront premium discounting, the FAAA noted that it has become increasingly common for insurers to offer substantial short-term reductions to new clients. While advantageous for some, this practice can disadvantage existing policyholders who remain on their original plans. The FAAA suggested that the review could consider whether the Code should address pricing practices to prevent such inequities.
Summary of FAAA Concerns:
| Issue | FAAA Position | Impact on Consumers |
|---|---|---|
| Double-digit premium increases | Require justification | Can nearly double premiums over a few years |
| Premium sustainability | Greater transparency needed | Helps households plan financially |
| Upfront discounting | Problematic for existing clients | Encourages switching and disadvantages long-term holders |
| Future premium projections | Need clear communication | Reduces financial uncertainty |
The FAAA’s submission underscores a growing demand for transparency and fairness in the Australian life insurance sector, particularly at a time when consumers are struggling with escalating costs and complex pricing practices.