AMP Life has prevailed in a complaint lodged by an income protection (IP) customer, who believed he was misled when he was informed his premiums would increase by more than 100% in January this year.

The customer says since his policy was set up on a level premium structure, there was no basis for the 104% hike in premiums for the policy, which started in January 1999.

He also told the Australian Financial Complaints Authority (AFCA) that the insurer misled and deceived him about the impending premium changes in a notification letter.

The man says the notification implied inflation was the reason for the 104% increase in premiums.

But AFCA disagrees, ruling the insurer did not mislead or deceive the IP policyholder.

AFCA says the correspondence letter clearly outlined the reasons for the premium increase are changes to premium rates and inflation.

“The letter is not misleading,” AFCA ruled. “Further, the letter demonstrates the insurer informed the complainant of premium increases at least one month prior to the increase taking effect.

“This is in accordance with the policy terms.”

An excerpt of the letter reproduced in the AFCA ruling says premium rates are reviewed each year and that the premium was increased to ensure future claims can be supported. It was also stated in the letter that premiums are automatically raised so that insurance benefits keep up with the rising cost of living.

AFCA says it has no jurisdiction to review the level or the general fairness of an insurance premium but ruled it is satisfied AMP Life applied the premiums lawfully and in accordance with the policy terms.

The two parties were not able to provide a copy of the original policy schedule but the complainant did not dispute receiving a copy of the policy document dated September 1996 that says premiums can be increased regardless of the premium structure.

“The policy wording is clear and not misleading,” AFCA ruled. “It confirms level premiums may increase because of any increase in benefit amount as well as if the insurer increases its standard premium rates.”

AMP Life says it needed to increase premiums to cope with increased claims. Concerns about the sustainability of the IP product line and the broader individual disability income insurance market prompted the prudential regulator in December 2019 to step in with new measures to shore up the market.

AFCA says increases of the kind experienced by the complainant have been common across the life insurance industry in recent years.

Click here for the ruling.