Australian life insurance consumers have faced repeated double-digit premium increases in recent years, prompting calls from the Financial Advice Association of Australia (FAAA) for insurers to provide clear explanations for these rises.
In its submission to the ongoing independent review of the Life Insurance Code of Practice, the FAAA highlighted significant premium hikes as a primary concern, alongside confusion caused by insurers’ practice of offering upfront discounts to new policyholders.
The review, chaired by former Australian Securities and Investments Commission (ASIC) deputy chair Peter Kell, was told by the FAAA that “over recent years, life insurance consumers in Australia have been subject to very significant premium increases on their life insurance policies.”
“These have involved repeated double-digit increases, meaning that many policyholders may now be paying nearly twice as much as they were just a few years ago,” the FAAA noted.
The association emphasised that, while life insurance premiums naturally rise with age, large, abrupt price increases place considerable strain on household budgets. “Such substantial premium increases can add pressure on clients, particularly those already facing other financial challenges,” the submission stated.
The FAAA stressed the importance of premium sustainability and transparent communication. It recommended that insurers provide clearer guidance to clients about expected medium-term premium increases and that the accuracy of these projections be monitored.
“The ability to increase premiums is the primary lever available to life insurers. It should be used judiciously and with a high level of transparency. Achieving greater premium sustainability is a key demand of life insurance clients and must be a priority for insurers,” the FAAA said.
Additionally, the association criticised the growing practice of offering upfront short-term premium discounts to new customers. This practice often incentivises existing clients to switch policies to access discounts, potentially disadvantaging long-term policyholders.
Table: Illustrative Impact of Repeated Double-Digit Increases on Life Insurance Premiums
| Policyholder Type | Premium 5 Years Ago | Current Premium | Approximate Increase (%) |
|---|---|---|---|
| Single adult, 35 | $800/year | $1,520/year | 90% |
| Family policy, 40 & 38 | $2,200/year | $4,000/year | 82% |
| Retired couple, 65 & 63 | $1,500/year | $2,700/year | 80% |
The FAAA suggested that addressing these pricing practices could form a key part of the Code review, noting that transparent, predictable premium policies would better protect consumers while enhancing trust in the life insurance sector.