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'Lawful and consistent': insurer wins dispute over premium rises

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A complainant who disputed the increased premiums charged to two policies he held with AIA has been told the new rates were raised “lawfully” and were “consistent” with the contract terms.

He took his case to the Australian Financial Complaints Authority (AFCA), arguing the higher premiums for his income care and total care policies are unfair, higher than disclosed in the correspondence he received from the insurer, and that the revised rates should be reviewed and rectified.

But AFCA dismissed his complaint, ruling the policies that he had taken up with the assistance of an adviser were on a stepped premium structure, meaning rates will increase over time as the insured gets older. The adviser is not an agent of AIA.

AFCA says its remit does not allow it to deal with complaints about the level of a premium unless it falls within certain exceptions.

Based on what the complainant submitted, AFCA says the contracts for the two policies specifically spell out details about the application of the stepped premium structure and how they work.

“There is no dispute the complainant received the policy documents,” AFCA said. “I accept the policies clearly and unambiguously explain that when a stepped premium is selected, the premium will generally increase as a life insured gets older.”

AFCA notes also that the two policies, which the complainant took up in August 2012, contained provisions that “clearly” state future premium rates are not guaranteed and the insurer can change these rates for all policies in a group.

AIA changed the rates of the premiums in the 2020 policy anniversary for both policies, resulting in some of the premium increase.

AFCA says insurers rely on sufficient premiums being paid to cover potential claims, and if an insurer is unable to alter its premium within the terms of the policies, then its financial health may suffer.

Click here for the ruling.