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AFCA approves IAG 75% premium hike

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A NSW homeowner who filed a complaint against IAG, alleging the insurer unfairly raised his property insurance premium by about 75% when the policy was up for renewal this year, has lost his dispute.

The Australian Financial Complaints Authority (AFCA) ruled IAG correctly adjusted the premium according to its underwriting criteria, which takes into consideration exposure to bushfire danger and other factors such as claims history and age of property.

In his complaint to AFCA the homeowner says the increase was not justified, asserting the insurer should not have attached a bushfire weighting risk to his property.

He says the property is not in a bushfire zone. To support his case, he provided reports from his council and the NSW Government that stated his house was located in the Vegetation Buffer Zone.

The complainant says the reports show the insurer has incorrectly raised his premium to reflect bushfire risk when his property faced no such danger.

But AFCA was not persuaded by his arguments after it heard from IAG.

The insurer explained to AFCA it had implemented a new pricing model last year for properties in bushfire and flood zones. The model is set up so that a property’s location and proximity to such zones will be a relevant risk factor in calculating a premium.

As a result, the complainant’s property was assessed as sitting within a bushfire risk area, IAG said.

The insurer also clarified premiums are based on many factors, not just bushfire risk alone. Other matters that are under consideration include compulsory government taxes and market claims trend, which has gone up because of last summer’s catastrophic bushfire season.

IAG also provided commercially sensitive actuarial data to AFCA that proved it has calculated the new premiums correctly according to its underwriting criteria.

AFCA says it is satisfied with the insurer’s explanation, ruling the premium increase has been adjusted based on its underwriting criteria and processes.

“I appreciate the complainant feels his property should not be deemed as being in a bushfire zone,” AFCA said. “However, the insurer is not limited to particular technical definitions or the strict assessment of other authorities or bodies, in identifying and weighting factors such as ‘bushfire’ risk.

“There is no evidence to suggest the complainant has been treated any differently to other policyholders in his circumstances.”

AFCA also says the complainant is not obliged to stay with IAG if he is unhappy that the insurer did not ask for his permission before increasing his sum insured.

The complainant had said the premium hike arose partly because IAG raised the sum insured for the property and its contents.

AFCA says it is not unusual for an insurer to propose increases in sums insured at renewal to reflect gains in property values and other relevant factors.

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