Consumers will make better decisions when buying cover if insurers improve the information they give on pricing structures and costs, according to the Financial Rights Legal Centre.

Most consumers have no real awareness of their cover because insurance disclosure is “poor and ineffective”, it says.

“If a consumer is aware of component pricing and the various loadings for risk, plus the actual risk they face, price will no longer be the sole motivation but also adequate coverage.”

Insurers will start using key facts sheets in November.

The centre says this is a step forward but may be ineffective because the disclosure is unlikely to be accessed online and it will not be given verbally when cover is sold.

The centre has told the Productivity Commission’s inquiry into disaster funding that disclosure must be improved. 

It calls for independent and government-funded comparison sites.

The centre – formerly the Consumer Credit Legal Centre, and which operates the Insurance Law Service (ILS) – says flood cover is still a major problem.

“We have recently been approached by at least one insurer concerned about the number of customers opting out of flood insurance, even where the increase in premiums is not significant, and wanting to know to what extent we can help people better understand their risk,” it says.

But customers are extremely price-sensitive. The ILS regularly receives calls from consumers unhappy at the flood cover component of premiums. Some say they cannot afford cover or complain about risk assessments and insurers failing to take account of mitigation work.