The General Insurance Code Governance Committee (GICGC) has called on insurers to meet their commitments to transparency with customers regarding the cost of insurance premiums.
In its report published today, Clear costs at renewal: payment options and pricing transparency, the GICGC found that some insurers are not giving customers clear and accessible information about whether paying monthly, fortnightly or quarterly will cost more overall than paying annually.
Chair of the GICGC Veronique Ingram said insurers needed to be clear with customers about the actual cost of each payment option.
“When an insurer charges different amounts depending on how a customer pays, the insurer should clearly disclose the differences,” Ms Ingram said.
“Customers should be able to easily see, at renewal, whether one payment option will cost more than another. That is basic price transparency.”
The GICGC found many insurers were already meeting this expectation by clearly explaining the difference where one applied. It also noted that some of the insurers it reviewed do not charge more for paying by instalments.
Ms Ingram said that a lack of price transparency by any insurer cannot be justified.
“Many insurers are already doing the right thing,” Ms Ingram said.
“Some do not charge customers more to pay by instalments at all. Others do charge more but are upfront about the difference. In that context, it is unacceptable for any insurer to leave customers without clear information about what they will pay.”
The report found some renewal notices used vague statements that annual payment “may” be cheaper or told customers that instalment fees “may” apply, without clearly setting out the cost difference.
The GICGC said the issue affected a significant number of customers, with some products reviewed having half or more customers paying by monthly or fortnightly instalments – customers who need clear information when making decisions about household expenses.
Ms Ingram highlighted the importance of transparency for customers deciding whether to continue their cover and how to manage the cost of their premium.
“This is not about telling insurers what pricing model they can use,” she said.
“But if an insurer chooses to charge different amounts for different payment options, it must be open and transparent about the implications of that choice. Customers are entitled to clear and accessible information before they make a decision.”
The General Insurance Code Governance Committee will continue to monitor insurer practices and may consider further action if insurers do not adopt sufficiently transparent pricing practices.
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