The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have issued a joint letter to CEOs of life insurers about premium increases in the life insurance industry.
The regulators have seen complaints from consumers, and reportable situations from insurers, about premium increases in retail life insurance policies.
The letter outlines APRA and ASIC’s concerns following complaints from consumers and reportable situations related to premium increases, particularly in relation to level premium products. APRA and ASIC request life companies to review their past premium increases, and disclosure and marketing material.
The letter also outlines APRA and ASIC’s expectations on the design of future product offerings.
The regulators say that they 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; and/or
• have not acted in accordance with the reasonable expectations created through the relevant disclosure and marketing material.
These concerns indicate that some life companies do not have effective systems, processes, and controls in place to ensure:
• clear and effective disclosure has taken, and continues to take, place;
• that all premium changes are made in accordance with the applicable documents that form the contract between the insurer and consumer;
• that marketing material and other documents are not misleading; and
• continued compliance with their legal obligations, including acting efficiently, honestly and fairly.
APRA and ASIC request all life companies that write, or have written, retail life insurance policies to review past:
• premium increases, including for legacy products, to ascertain whether increases or repricing decisions have been applied in accordance with the applicable policy terms; and
• disclosure and marketing material to determine whether policyholders have been provided sufficient clarity about future premiums, including how premiums may change over the life of the policy.
APRA and ASIC acknowledge that ensuring the ongoing sustainability of life insurance products is a challenging issue.
APRA’s measures related to individual disability income insurance (IDII) have set clear expectations on the design of sustainable products, including the need to provide policyholders with reasonable premium stability.
The regulators request that all life companies that write, or have written, retail life insurance policies respond to ASIC.