Life insurers have been ordered to review past pricing practices after complaints from consumers over increases to retail products, especially for “level” premium policies, and also reportable situations from the industry related to rate changes. 

The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) say they expect the industry to report back by March 31 next year. 

“We are concerned that some life companies have not appropriately applied premium increases to retail life insurance policies, particularly level premium policies, in accordance with the policy terms,” the regulators say in a joint letter to the industry and friendly societies. 

The letter also flagged concerns that some providers “have not acted in accordance with the reasonable expectations created through the relevant disclosure and marketing material”. 

Disputes over “level” premium adjustments have been increasing, according to the Australian Financial Complaints Authority (AFCA). 

Senior Ombudsman Vicki Carter told an AFCA Member Forum in August the word “level” may be an industry term for non-stepped premiums but for consumers it can be confusing, as it is apparent that many don’t understand what it means. 

She said finding a “more appropriate” term to replace the word “level” will help to reduce the number of complaints that insurers and AFCA receive when “level” premium policies are repriced. 

ASIC and APRA say in their letter they are concerned some in the industry do not have effective systems, processes, and controls in place to ensure “clear and effective” disclosure has taken, and continues, to take place. 

Life insurers are expected to provide in their review whether past premium increases/repricing, including for legacy products, have been applied in accordance with the applicable policy terms. 

They must examine past disclosure and marketing material to determine whether policyholders have been provided sufficient clarity about future premiums, including the way in which premiums may change over the life of the policy. 

Life insurers should also review existing product labels and consider the appropriateness of describing a product as “level premium” if there is not a high degree of confidence around premium stability, the joint letter says. 

For insurers who are unable to meet the March 31 deadline to report back to ASIC, they are expected to provide an update by February 28 on the steps being taken to complete the review and the likely timing. 

Click here for more from the letter.