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Landlord loses complaint over 25% premium hike

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The Australian Financial Complaints Authority (AFCA) has upheld a decision by Terri Scheer to raise the annual premium for a landlord insurance policy by 25% when it was renewed last year.

AFCA says it accepts the increase is “significant” but ruled the Suncorp-owned landlord insurance specialist properly calculated the new premium based on data considered at a suburb and postcode level.

The new premium takes into consideration the investment property’s flood exposure and other potential risks.

“Whilst the complainants were unhappy with the increase, I am satisfied it was reflective of the insurer’s recalculation of the flood risk for the local area,” AFCA says in its ruling.

“I acknowledge the report from the complainants that the flood risk at their property is minimal, although the insurer made it clear its consideration is based on the suburb/postcode area and not simply the home.”

According to the ruling, the insurer explained that the “significant premium increase” was due to the use of a flood modelling system. The increased risks related to the use of this system were not applied between 2014 and early 2020.

“This goes some way to accounting for the extraordinary increase during the subject period,” AFCA says.

The complainants took the dispute to AFCA after rejecting the insurer’s explanation for the premium increase.

They say the increase for the building insurance from $1,182.86 to $1,478.57 is “too high” and “unfair”. They want a refund from the insurer for premiums that have been paid for the policy, which was renewed on September 15 last year.

The complainants also requested that the insurer applied an increase of no more than 1% to the new premium.

They argued the insurer must look at their property specifically including a report they have produced that showed there was minimal flood risk.

But AFCA disagreed. The financial dispute resolution body says “the right to determine the acceptance of a risk and the weighting given to that risk in any given policy year is with the insurer”.

“The complainants were not obliged to accept the renewal policy if they did not agree with the price,” AFCA ruled. “This is the insurer’s prerogative and it is not within AFCA’s scope to change.

“Accordingly, I am satisfied the insurer is not required to reduce or refund any premium to the complainants.”

Click here for the ruling.