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Green light for rate rises after level premium dispute 

Another complaint over level premium increases by insurer TAL has failed, with the Australian Financial Complaints Authority ruling the rises were allowed as outlined in the contracts.

An income protection policyholder and his superannuation fund trustee – which has life and total and permanent disability policies with TAL – said the insurance provider did not have the right, under the terms of the policies, to raise premiums. All policies in the dispute have level premiums.

They said even if the increases were allowed, they had been misled. They wanted the premium increases reversed and refunded, and no future increases of the same kind.

The complaints authority – which refers to the policyholder and fund trustee collectively as the complainant – agrees they were misled because the initial policy documents did not explain clearly enough the meaning of level premiums.

The authority says the insurer has remedied the misleading policy document with a letter to the complainant explaining premiums are reviewed every year based on age, level of cover including consumer price index changes, and a range of other aspects. It notes the insurer later offered a refund for premium increases prior to 2019 and that the complainant accepted the refund.

Discussing whether the insurer was allowed to increase premiums, the authority says TAL was permitted under the terms as outlined in the policy documents.

It says the terms relate to calculation and changing of premiums, and extracts of the documents reproduced in the dispute said for level premiums, the insured could expect a lift in rates if the sum insured rose with consumer price index increases.

“The policy allowed the insurer to increase premiums,” the authority said. “The insurer is not required to give a further refund. It is not prevented from increasing premiums in the same way in the future.”

It says its ruling is consistent with previous determinations on level premium issues.

“[The authority] must have regard to previous determinations, but is not strictly bound by them.”

The authority said in 2022 that the industry’s use of the term “level premium” was confusing for life insurance policyholders and led many to believe the premiums they paid would not change.

Click here for the ruling.