Auto & General does not have to apologise to a former customer after more than doubling his home contents premium, the financial services ombudsman has ruled.

The customer complained after being offered a renewal price of $1019 last year, up from $478 the previous year.

The insurer gave several reasons for the rise, including higher expected claim costs due to floods caused by overland flow and the removal of a one-off discretionary discount.

The complainant argued the flood element was unfair, given his apartment was on the 15th floor of a complex.

But the insurer noted many apartment blocks have storage areas on or below ground level that are at risk.

The man switched to a cheaper policy with another insurer, but he took the matter to the Australian Financial Complaints Authority, demanding Auto & General apologise and acknowledge it was overcharging customers.

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In its dispute ruling, the ombudsman says the insurer’s premium explanation was consistent with pricing factors outlined in policy documents.

“The insurer has the discretion to set policy premiums based on its assessment of risk,” AFCA said.

“This discretion includes deciding how to rate or weight the risk factors (such as the likelihood and cost of claims) and how it estimates expected future cost increases.

“The complainant then has the discretion whether to accept the premium offered or to seek cover with another insurer.”

The authority notes its limited power to intervene in premium disputes but says Auto & General did not make non-disclosures or misrepresentations, nor breach legal duties.

There is “no basis for AFCA to compel the insurer to take any action regarding the premium”.

The insurer provided a breakdown of the premium to AFCA but insisted this could not be shared with the complainant. AFCA does not usually rely on information that is not available to all parties, but made an exception in this case.

"AFCA accepts the weighting and pricing applied by an insurer is commercially sensitive information," the ombudsman said.

"Therefore, I accept special circumstances apply to the statement from the insurer’s pricing team, and AFCA can consider it without it being exchanged. This allows AFCA to consider the basis for the premium pricing without prejudicing the insurer’s commercial interests."

See the ruling here.

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