Life insurers may need a better way of explaining how stepped premiums are calculated, the Australian Financial Complaints Authority told a member forum.

AFCA handled 109 disputes about incorrect fees/costs – second only to denial of claims (117 cases) – in the six months to December. Claims delays placed third in the breakdown of complaints by issue.

“You will see from the data … that complaints about premiums are still quite predominant, and that arises from people not really understanding, one way or other, how stepped premiums work and also being surprised about their policy costs as they get into higher ages,” lead ombudsman for insurance Emma Curtis told the forum this month.

“Those disputes never seem to go away, and I don’t think they ever will, at least not until there’s a different approach taken and perhaps a better way of letting people know what their premium projections look like at the point of sale, and then each year ... at renewal time.”

Ms Curtis says the same goes for policies on which level premiums are re-rated.

“I think we’ll keep getting those complaints as long as premiums keep getting re-rated, and there’s a bit of bill shock there for customers when they get their premium reminders.” 

AFCA has previously raised concerns over stepped premiums, which increase as the insured gets older.

The dispute authority also shared observations about income protection – the most complained-about product in the December half, prompting 247 disputes.

Ms Curtis said: “There are often [IP] disputes about calculating benefits, about the pre-disability and the post-disability income, and also because it’s a long-term benefit, there’s an ongoing claims process, which means there can be disputes about claims handling over the whole life of the claim, which can be many years. 

“And another factor is that income protection has been especially hit hard by rising premium rates, so we always get complaints about that ... because of the nature of the product, it’s a periodic benefit ... it’s calculated according to a formula rather than a set lump sum.”