In Australia, insurance industry regulators APRA and ASIC have sent an open letter to past and present CEOs of retail life insurers citing serious concerns over premium increases.
Pointing to complaints from consumers and reportable situations from insurers in relation to premium increases in retail life insurance policies, they have tabled concerns that some life companies:
- Have not appropriately applied premium increases to retail life insurance policies, particularly level premium policies, in accordance with the policy terms; and/or
- Have not acted in accordance with the reasonable expectations created through the relevant disclosure and marketing material
The letter notes these concerns indicate that some life companies do not have effective systems, processes and controls in place to ensure:
- Clear and effective disclosure has taken, and continues to take, place
- That all premium changes are made in accordance with the applicable documents that form the contract between insurer and consumer
- That marketing material and other documents are not misleading
- Continued compliance with their legal obligations, including to act efficiently, honestly and fairly
With regard to existing policies, including legacy products, the regulators request all life companies that write, or have written, retail life insurance policies to review past:
- Premium increases, including for legacy products, to ascertain whether increases or re-pricing decisions have been applied in accordance with the applicable policy terms; and
- Disclosure and marketing material to determine whether policyholders have been provided sufficient clarity about future premiums, including the way in which premiums may change over the life of the policy
Looking to the future, the open letter notes life companies should:
- Consider the appropriateness and clarity of disclosures and marketing material as they relate to future premium increases
- Review existing product labels, considering the appropriateness of describing a product as ‘level premium’ if there is not a high degree of confidence around premium stability
- Consider how to manage the reasonable expectations of policyholders around premium increases in an ongoing manner
Insurers have been ‘requested’ to respond to ASIC by 31 March 2023, outlining:
- Any findings in relation to their review of past premium increases which may not have been applied in accordance with the applicable policy terms
- Disclosure and marketing material which may have misled policyholders about the premiums they would have to pay
- If any issues of concern were identified, what steps are planned to report, rectify and remedy these issues
- Their proposed actions to meet regulator expectations about the design of future product offerings
Take this link to read the open letter issued by ASIC and APRA. The letter notes ASIC will arrange meetings to discuss individual responses in April-May 2023.