Colonial Mutual Life has been ordered to pay an income protection policyholder $1500 compensation after providing incorrect explanations for premium increases.

The Australian Financial Complaints Authority (AFCA) partially ruled in favour of the policyholder, who complained following a jump in premium payments following a suspension period for a claim.

The woman said the premiums were much higher than expected after the claim ended and the insurer had either made an error or had failed to disclose the increases correctly.

AFCA ruled that the insurer did not misrepresent the fact that premiums would rise and gave sufficient notice of the re-pricing.

The complainant was not singled out for increases and the insurer complied with the terms of the policy.

“The policy documents clearly say that stepped premiums increase in line with an insured’s age, amongst other reasons,” it says. “Each premium increase was explained annually via renewal notices or premium re-rate notices.”

But it also found that the insurer provided several incorrect explanations for the increases.

“An insurer should always be able to clearly and accurately explain any premium increase,” the ruling says. “It’s failure to do so in a timely way in this case has caused confusion, delay and distress to the complainant.”

Click here for the decision.