Need to know
- In a national CHOICE survey conducted last year, nine out 10 policyholders said their premiums had gone up with their most recent renewal notice
- Plenty of home insurance customers have lodged complaints with the Australian Financial Complaints Authority in recent years about excessive premium increases
- We looked through around 140 AFCA determinations and found only a handful in which AFCA ruled in favour of the policyholder
When CHOICE sent out a national survey last year asking about home insurance premium hikes, people around the country let us know just how big the issue had become.
Nine out 10 policyholders said their premiums had gone up with their most recent renewal notice, and a third said they'd gone up a lot.
Under the voluntary general insurance code of practice, insurers are meant to include a comparison between your previous 12-month premium and the new one and show how it was calculated, yet two out of five of the people we heard from (39%) said they weren't given any explanation.
In cases where explanations were given, they were often of the generic variety, such as rising costs, inflation and 'market forces'.
Plenty of home insurance customers have lodged complaints with the Australian Financial Complaints Authority (AFCA) in recent years about major home insurance premium increases, but in the vast majority of cases the determinations have gone in favour of the insurance company.
The cases where AFCA ruled in favour of the policyholder
CHOICE looked through around 140 AFCA determinations involving complaints about general insurance premiums going back to January 2019, about half of which were about home insurance.
We found only a handful of determinations in which AFCA ruled in favour of the policyholder, most recently in a decision against Suncorp in June this year. The Suncorp policyholder couldn't understand why their renewal notice arrived announcing a 60% premium increase, particularly since they saw no increased risk to their property.
We found only a handful of determinations in which AFCA ruled in favour of the policyholder
AFCA agreed with the policyholder on the grounds that Suncorp hadn't provided a valid explanation for the increase and ruled that the premium had to be reduced in line with the average increases to the policy since 2020.
AFCA also sided with the policyholder in an August 2020 determination against A&G insurance, ruling that a premium increase from $968 to $1426 was unjustified due to the failure to apply an available discount. A&G was instructed to reduce the new premium by 39%.
In July 2020, AFCA issued a determination against A&G in a case where the personal effects portion of the complainant's home and contents policy had gone from $309 to $553, a 79% increase. AFCA ruled that the increase be rolled back to 12%.
AFCA agreed with the policyholder on the grounds that Suncorp hadn't provided a valid explanation for the increase
And in another case, in January 2019, AFCA ruled that a policyholder's premium, which had gone up 38%, should be reduced because the insurer hadn't fairly applied the risk rating.
In a few other cases involving home insurance premiums, AFCA has ruled in favour of the policyholder but the complaints were not specifically about large premium increases.
270% premium increase ruled okay
Decisions in favour of policyholders when it comes to home insurance premium increases are exceptions to the rule. In May this year, AFCA decided in favour of QBE insurance in a case where a woman's home insurance premium had gone from $3686 to $10,089, roughly a 270% increase. AFCA determined that the risk assessment that led to the increase was valid, particularly with respect to floods.
In another May 2024 case involving RACV insurance, a policyholder's premiums went up around 45% on various policies over a two-year period, but their complaint was knocked back because AFCA found no evidence of non-disclosure, misrepresentation or incorrect application of charges.
Due to the limits on its mandate, AFCA has delivered many determinations in favour of insurance companies in recent years
In the most recent published determination on this issue that we looked at, from 24 October this year, a home insurance customer lodged a complaint on the grounds that their premium had unjustifiably gone from $2027 to $6596, a 225% increase. But AFCA didn't find any evidence of wrongdoing in this case either.
Due to the limits on its mandate, AFCA has delivered many such determinations in favour of insurance companies in recent years.
The deciding point for AFCA is whether insurers explain the reasons behind premium increases, or at least do a reasonable job of trying to.
Risk assessment integrity not in AFCA's remit
The deciding point for AFCA is whether insurers explain the reasons behind premium increases, or at least do a reasonable job of trying to. The external dispute resolution (EDR) service isn't authorised to look into whether the insurer's risk rating methodology is valid and accurate – all the insurer has to do is demonstrate that such an exercise was behind the jump in premiums.
As one of the determinations puts it, "AFCA cannot consider a complaint about rating factors and weightings applied by the insurer to determine the base premium which is commercially sensitive information".
To gain more insights into the Suncorp decision – and whether more determinations might go in the policyholder's favour in future – CHOICE interviewed AFCA's lead ombudsman for insurance, Emma Curtis.
The limits of external dispute resolution
Curtis explained that AFCA is well aware that home insurance costs are rising sharply across the market and that an increasing number of homeowners can't afford to protect their most valuable asset. But the EDR service is not in a position to reverse this trend through its case-by-case determinations.
Complaints about premium increases have also been on the rise, Curtis says, but they're a small proportion of home insurance complaints overall, which are mostly about claims handling, how much insurers offer to pay in claims, and claims denials.
"We have a very specific role when it comes to insurance premiums," Curtis says.
"We can look at complaints where there's a concern that the premium was wrongly calculated or wrongly disclosed or wrongly applied at renewal or in the initial quote. We don't have the power to consider complaints just because someone is generally unhappy about the increase. There needs to be a specific error such as a mistake by the insurer in calculating the premium."
But a ruling in favour of the insurer doesn't necessarily mean it has done a good job at clearly explaining premium increases. In many cases, insurers could be doing a lot better, Curtis says.
We don't have the power to consider complaints just because someone is generally unhappy about the increase
AFCA lead ombudsman for insurance, Emma Curtis
"We encourage insurers to be open and transparent about the reasons for a premium increase, especially when it's a large increase."
Insurers should also explain what policyholders can do to decrease risks to their property and lower their premiums, something that doesn't often happen.
Curtis outlined one example of commendable transparency, where an insurer included an explanation of the specific weather factors threatening a policyholder's property in a renewal notice where premiums went up significantly.
She says home insurance customers should talk to their insurers if they're hit with a big premium increase.
"There may be some things they can do to reduce the premium or at least explain the reason for the increase. And of course, consumers can also shop around."
Stock images: Getty, unless otherwise stated.
