‘Exorbitant’ premium rise driven by insurer ‘managing market share’
Homeowners have lost a dispute over soaring premiums after their insurer made changes “to manage market share in different geographies”.
The RACQ Insurance customers took their case to the Australian Financial Complaints Authority, arguing a 47% rise in home and 29% increase in contents premiums was “exorbitant”.
The residents, whose proposed home and contents premium was more than $14,000, said they had not made a claim in 16 years and the property did not flood in 2019 when the area suffered its worst rainfall event.
They said risks had not increased and they could switch to another insurer that charged less than half the amount, leading them to believe they had been “overcharged significantly for several years”.
RACQ Insurance argued it had transitioned to a risk-based model that enabled address-level pricing for specific perils, and the premium had been calculated correctly.
“Since the previous term, the renewal premium was subject to an extensive pricing review that re-evaluated and repriced risk in the entire home portfolio,” AFCA’s ruling says.
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“This review included: repricing of natural peril risk; addition of the [reinsurance pool] perils; and adjustments to manage market share in different geographies, which was the primary driver of the change in this policy.”
AFCA’s ombudsman agrees no error was made, and has explained the limits of the authority’s jurisdiction on premium rises.
“While I acknowledge the complainants’ concerns how their risk had not changed over the years and their claim history, AFCA cannot consider if the factors/components that form part of the insurer’s modelling and other criteria which placed the insured property at a higher risk resulting in the premium increase was correct or not.”
AFCA adds the complainants are not entitled to compensation for the time spent researching other insurance offers.
The complainants said RACQ Insurance’s conduct forced them to spend two days comparing policy wordings. The insurer had offered $500 but withdrew it after this was not accepted.
See the full ruling here.