Regulatory Bodies Demand Clarity on Duration-Based Insurance Premiums

They have emphasised the need for insurers to improve transparency, ensuring that consumers are fully informed about the long-term costs associated with initial premium discounts.

In a thorough review of the sector, ASIC and APRA criticised the lack of clarity with which insurers communicate the implications of duration-based premiums to the public. The corresponding letter to insurers highlighted the particular challenges faced in the Individual Disability Income Insurance (IDII) market, where understanding the pricing structures becomes crucial.

The regulators pointed out that to remain competitive, insurers often charge new, underwritten customers lower premiums based on their reduced claim likelihood. However, these introductory discounts tend to diminish over time, leading to significant premium increases. It is expected that insurers will now increasingly come under scrutiny to justify their pricing models and ensure consumer comprehension of these shifts.

The interventions by APRA within the IDII market have demanded insurers re-evaluate if their pricing strategies, characterised by steep curves, genuinely serve the consumer’s interest. This introspection has prompted some life insurance companies to consider innovative solutions, such as maintaining stable premiums or offering more tailored pricing options to better align with customer expectations.

APRA and ASIC have set forth clear expectations for life insurers:

Implement duration-based pricing only when it accurately reflects a reduction in risk.
Proactively communicate to consumers how duration-based pricing and temporary discounts evolve over the policy's lifetime.

The regulatory recommendation has already seen several insurers update their Product Disclosure Statements to more transparently clarify that premiums are likely to increase the longer a policy is held. Some companies have taken additional steps, explaining the impact of early underwriting benefits and the potential for increased premiums over time.

ASIC remains steadfast in its belief that simply informing consumers of the time-based factor in premium adjustments is insufficient. They stress the necessity for comprehensive disclosures that elucidate to consumers the precise nature and the full extent of duration-based pricing impacts.

Published:Friday, 6th Jun 2025
Source: Paige Estritori

Share this news item:

Insurance News

Regulatory Bodies Demand Clarity on Duration-Based Insurance Premiums

06 Jun 2025: Paige Estritori

Australia’s leading financial regulators, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA), have raised concerns regarding the practice of duration-based pricing in life insurance products. They have emphasised the need for insurers to improve transparency, ensuring that consumers are fully informed about the long-term costs associated with initial premium discounts. - read more

Young Driver Left Uncovered Due to Policy Misstep

05 Jun 2025: Paige Estritori

A policyholder faces a denied claim after inadvertently excluding his newly licensed 21-year-old son from his car insurance policy, highlighting a common oversight in age-specific exclusions. Following a collision involving his son, who recently earned his licence, Hollard Insurance declined the claim based on policy terms that excluded drivers under 25, unless accompanied by a qualified adult. - read more

NSW Floods Highlight Critical Insurability Crisis

05 Jun 2025: Paige Estritori

Recently, New South Wales has been severely affected by major floods, with damages to around 10,000 homes and businesses. The Insurance Council of Australia has already received over 6,000 claims from the Mid North Coast and Hunter regions, while countless families face displacement as their homes become uninhabitable. - read more

Ride-Share Driver Prevails in Insurance Dispute Over Vehicle Use

04 Jun 2025: Paige Estritori

A ride-share driver recently won a significant claim dispute against an insurer that initially denied his claim following a traffic accident. The Australian Financial Complaints Authority (AFCA) sided with the driver, determining that Auto & General could not prove he misrepresented his vehicle use when purchasing his insurance policy. - read more

Business Insurance Articles

Public Liability Insurance Claims: What to Expect and How to Prepare

When it comes to navigating the complex waters of insurance, understanding public liability insurance claims is crucial for businesses and individuals alike. Public liability insurance serves as a safeguard, protecting against the financial repercussions that arise from accidents or injuries that occur on your premises or through your operations. In this introductory section, we will delve into the essence of public liability insurance and underline its significance. - read more

Critical Risk Management Strategies for Every Australian Tradesman

Welcome to the crucial world of risk management for Australian tradesmen. Whether you're a seasoned professional or just starting, understanding and mitigating the inherent risks in the trades industry is paramount to both the safety and sustainability of your business. This article intends to guide you through the world of risk management, emphasizing the pivotal role of liability insurance. - read more

Liability Risks: What Small Businesses in Australia Should Know

Welcome to our comprehensive guide on liability risks for small businesses in Australia. The world of business is fraught with challenges, and one often overlooked aspect is the array of potential liabilities that can stifle growth or even lead to catastrophic financial loss. It's crucial for small business owners to grasp the critical role that insurance plays in the protection and longevity of their ventures. - read more

Understanding Liability Insurance: A Must-Read for Australian Small Business Owners

Liability insurance is a form of insurance designed to offer protection against claims resulting from injuries and damage to people or property. It covers legal costs and any payouts for which the insured party would be responsible if found legally liable. Intended to protect against claims resulting from injuries and damage to other people or property, liability insurance is critical for small businesses as it shields them from potentially crippling legal expenses. - read more

The Impact of Environmental Liability on Australian Business Operations

In today's ever-evolving business landscape, the significance of environmental sustainability and legal accountability is increasingly paramount. Australian enterprises, in particular, are encountering a growing need to understand and manage environmental liability. This reality not only influences corporate image but also carries substantial financial and legal ramifications. - read more

The Cost of Public Liability Coverage: Is It Worth It?

Public liability insurance is a crucial safety net for both businesses and individuals, providing protection against the financial fallout from claims of injury or damage that your business operations might cause to third parties. This type of insurance is designed to cover legal and compensation costs, safeguarding you from unexpected financial burdens. - read more

Critical Risk Management Strategies for Every Australian Tradesman

How to Lower Public Liability Insurance Premiums Without Sacrificing Coverage

In the ever-evolving landscape of Australian commerce, business insurance stands as a crucial bulwark, safeguarding enterprises against unforeseen financial perils. Recognizing this, our in-depth exploration begins with an overview of the monumental role business insurance plays for Australian companies, both large and small. It's a cornerstone for risk management, providing business owners with peace of mind as they navigate the intricacies of their industries. - read more

Start Here !

Knowledgebase

Public Liability Insurance:
Insurance which provides protection against liability to third parties.