A complainant who was refunded his annual premium following an insurer error has lost his bid for additional compensation over price rises.

The man’s crisis recovery insurance policy held an automatic CPI interest feature, in which the sum insured went up yearly with increased premiums. He said he was not informed of a rise in 2021.

Insurer AIA acknowledged it did not inform the man and it refunded the premium plus interest, amounting to $711, last October. It apologised for the error.

An Australian Financial Complaints Authority ombudsman accepted this had been a fair response to the issue.

However, the complainant said the insurer should not have raised the premiums because the policy had level premiums in place. He said records showed two consecutive increases, amounting to a 30.2% rise. 

The insurer said the increases were widespread and did not single out the complainant.

AFCA accepts the policy’s product disclosure statement noted premium rates were reviewed and level premiums were “not guaranteed and may be varied by [the insurer] from time to time”.

It says the increase was fair but the use of the “level premium” label is a “widespread and problematic” issue.

“The label ‘level premium’ conveys the impression that premiums will be relatively stable,” the authority’s ombudsman said. “Compared to stepped premiums, which always increase each year, level premiums are more stable.

“However, recent widespread and significant increases through repricing of level premiums – such as those experience by the complainant – have eroded the stability of level premiums. 

“I agree that the label ‘level premium’ may no longer be appropriate ... However, I am satisfied that the label ‘level premium’ was lawful and consistent with good industry practice at the time the policy was sold.”

Click here for the ruling.