Consumer advocates have criticised insurers for rejecting recommendations to stop companies charging more for monthly payments or quoting higher rates for renewing customers.

“The Insurance Law Service continues to hear from consumers hit hard by unfair pricing and premium practices,” Financial Rights Legal Centre senior policy and advocacy officer Drew MacRae said. “If insurers are unwilling to address these in the code [of practice], they must agree to work with government and consumer groups to reform the regulatory framework.”

The pricing practices impose a “poverty premium” on those paying monthly and a “loyalty tax” on renewing policyholders, the centre says.

The Insurance Council of Australia yesterday released an action plan outlining responses to 150 recommendations from the parliamentary floods inquiry and the industry code of practice review.

Both reviews said insurers should ensure people paying monthly rather than annually do not pay more. The independent panel examining the code also said the next version should require that home and motor renewal quotes are not more expensive than those for new customers.

ICA says prescribing pricing approaches is not the purpose of the code, and insurers cannot implement the recommendations due to competition law constraints.

Consumer groups have also raised concerns about code enforceability and the number of recommendations ICA has not fully accepted.

Mr MacRae says there are about 38 recommendations insurers will either investigate further or leave to individual companies to act on if they determine it is appropriate.  

“These latter responses are particularly disappointing and consumer groups will stay on top of the sector to ensure that they address all of these issues,” he said.  

Financial Counselling Australia says it is “very concerned” the ICA plan does not back action on inequitable practices that mean people pay more by the month and for renewals. 

“It’s simply unfair and must be addressed,” co-ordinator of disaster recovery Louise Hayes said.

“There are some good aspects to ICA’s action plan, particularly the commitment to a vulnerability framework. However, financial counsellors urge all insurers to commit to the framework, and to make sure it’s genuinely effective by improving the code of practice.” 

The floods inquiry recommendations included that the code be incorporated as a contractually enforceable clause in product disclosure statements; the code review also said it should be incorporated into customer contracts.

ICA noted the recommendations. It says it understands the reasons and will work with the Australian Securities and Investments Commission on the issue of enforceability.

Consumer Action Law Centre CEO Stephanie Tonkin says the industry must rebuild trust after the 2022 floods response.

“For that to happen, this ‘action plan’ has to be backed by teeth. In that way, the industry will be forced to change and focus more on the wellbeing of its customers than its corporate bottom line.”

ICA CEO Andrew Hall says the action plan includes themes for change that will guide the industry over the next couple of years and builds on work already started, with improving the customer experience central to this.

“We look forward to working with consumer advocates, regulators and the government to ensure our actions remain relevant and suitable in addressing the root causes of the problems identified,” he said.

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