Home / Regulatory & Government / Fels maintains push for premium details disclosure
15 April 2019
Providing details of the components that determine premiums will improve transparency and enable consumers to understand what policies cover, NSW Emergency Services Levy Insurance Monitor Allan Fels says.
The Insurance Council of Australia (ICA) has voiced concern at the proposal, included among recommendations in a Treasury discussion paper on ways to improve disclosure in general insurance.
But Professor Fels and Deputy Monitor David Cousins, in a joint submission as private citizens, say it will produce better consumer outcomes.
“The aim of component pricing is to make transparent to the insured the elements of risk that are taken into account in determining the insurance premium they pay, and the financial impact of those risk factors on that price,” they say in the submission.
“Insurers should provide a full break-up of the premium payable on a policy, including any taxes and charges included in the premium.”
ICA’s submission says the proposal could have implications for commercially sensitive information. Tests by several insurers suggest consumers believe it would mean “more extraneous information” to work through before making a decision.
Professor Fels and his deputy have dismissed these concerns.
“Suitably framed component pricing obligations appear, on balance, capable of enabling consumers to have more informed discussions with their insurance company about their risks and how to manage them,” they say. “Any risk to insurers is likely to be outweighed by the significant benefits this initiative is likely to provide for consumers.”
A Treasury recommendation to explain premium rises upon request has IAG’s in-principle support.
But the insurer wants more discussion on ways to explain the “complex” details of component pricing to consumers in an effective manner.
“IAG supports further exploration of what components of a price might be most useful and practical to provide to consumers,” the insurer says.
“However, there are many risks and challenges with component pricing. One concern is a risk of greater levels of underinsurance, as consumers opt out of insuring for low-frequency, high-impact scenarios to lower premiums.
“Another is that it is not clear how valuable this information would be to consumers.”
Suncorp favours year-on-year comparisons on renewal notices and wants a more careful approach around pricing component details.
“Caution should be taken… to ensure that the amount of information provided to customers on renewal documents is not unnecessarily increased,” Suncorp says.