Australian life insurance consumers have faced repeated double-digit increases in their premiums in recent years, prompting calls from the Financial Advice Association of Australia (FAAA) for insurers to provide clear explanations.
In a submission to the ongoing independent review of the Life Insurance Code, chaired by former Australian Securities and Investments Commission (ASIC) deputy chair Peter Kell, the FAAA highlighted significant premium hikes and the resulting confusion caused by upfront discounting practices as pressing concerns.
The FAAA emphasised that, “over recent years, life insurance consumers in Australia have experienced very significant premium increases on their life insurance policies. This has involved repeated double-digit rises, which in many cases means they are paying nearly double what they were just a few years ago.”
Life insurance premiums naturally rise with age; however, large pricing increases can place considerable strain on household budgets, particularly for clients already facing other financial pressures. According to the FAAA, improving transparency regarding future premium expectations is essential to ensure consumers can plan effectively.
The association also stressed the importance of premium sustainability, noting that a variety of factors influence potential future increases. They called for insurers to communicate medium-term projections clearly and suggested that adherence to these projections should be monitored for accuracy.
Key Issues Identified by FAAA:
| Issue | FAAA Concern | Suggested Action |
|---|---|---|
| Double-digit premium increases | Can nearly double consumers’ payments over a few years | Clear explanation and justification required |
| Upfront premium discounts | Incentivises clients to switch policies, disadvantaging existing clients | Consider regulating or reviewing discount practices |
| Premium sustainability | Large increases affect budgets, particularly for financially vulnerable clients | Improved communication and monitoring of projections |
| Transparency of future premiums | Lack of clarity on potential increases | Insurers should provide medium-term projections |
On the matter of upfront premium discounts, the FAAA noted that many insurers now offer substantial short-term discounts for new clients. While beneficial in the short term, this practice can disadvantage long-standing policyholders who remain on existing policies. Clients may feel compelled to seek new coverage frequently to access these offers, potentially disrupting continuity of protection.
“The ability to increase premiums is the primary lever available to life insurers and should be applied carefully with a high level of transparency,” the FAAA submission stated. “Greater premium sustainability is a key expectation of life insurance clients and must become a priority for insurers.”
The FAAA’s submission underscores the need for both clearer communication and more responsible pricing practices, ensuring that life insurance remains affordable, predictable, and fair for Australian consumers.
