Home insurers are failing to provide explanations for premium increases, new research has found.
Releasing a new report into home insurance premiums, consumer advocate group Choice said this week that 75 per cent of renewal notices gave no individualised reasons for price hike.
Research by Choice and Financial Rights Legal Centre (FRLC) has revealed a stark lack of pricing transparency across the industry, despite 77 per cent of Australians reporting concerns around home insurance premium prices – up from 52 per cent in 2020.
Choice and FRLC analysed home insurance renewal notices submitted by homeowners and found premiums commonly increased by 10 per cent to 20 per cent, but 3 in 4 renewal notices provided no explanation for why an individual customer’s premium had gone up.
The report also found:
- 71 per cent of policyholders did not understand why their premium had increased;
- 73 per cent of policyholders felt the premium increase was unfair;
- None of the renewal notices provided personalised insights into how premiums were calculated;
- 92 per cent of renewal notices did not include last year’s premium price on the first page for easy comparison.
Choice’s Head of Policy Morgan Campbell observed that for consumers to make informed decisions and help identify risks, there needs to be greater pricing transparency.
“How can consumers invest in reducing their risk and their insurance costs if they don’t know how that risk is being assessed in the first place?”, Campbell asked.
“Instead of incentivising consumers to make their homes more resilient to climate change, cheaper premiums are often only offered to new customers, or if you threaten to switch.
"Insurers know more about the risks facing our homes than anyone else, yet consumers are routinely given a premium increase without any meaningful explanation of what's driving it.
“We're getting the signal, but not the information needed to respond to it", FRLC’s Principal of External Relations & Advocacy Julia Davis added.
When Choice conducted a nationally representative survey earlier this year asking consumers about their trust in home insurers, only 17 per cent said they trusted their provider – the lowest figure since the survey began 11 years ago.
Campbell thinks it’s not surprising that trust in insurers is at a record low – homeowners are clearly frustrated with skyrocketing premium increases that arrive without clear justification.
“Many said their insurers relied on broad industry justifications or provided automated responses, rather than property-specific reasons for the price hike”, he said, adding that this gives consumers very little agency over their insurance costs and gets us no closer to making existing homes more resilient to increasingly frequent and extreme weather events.
“We’re calling for greater transparency across general insurance pricing. Consumers should have clear information about their premiums, including the calculations behind any price rise, risk assessments and what consumers can do to reduce their risk and their premium.
“We believe these actions will allow consumers to have more affordable and accessible insurance, ultimately rebuilding trust in the home insurance industry”, Campbell concluded.