Time for insurers to end the poverty premium
Financial Counselling Australia and the Financial Rights Legal Centre are calling on insurers to stop penalising people who cannot afford to pay their insurance premiums annually. It follows the release of a new report which finds some insurers are not telling customers that fortnightly or monthly options cost more overall.
The General Insurance Code Governance Committee (CGC) report, Clear costs at renewal: payment options and pricing transparency, reveals that while some insurers do not charge customers more to pay by instalments, others do and not all make the extra cost clear and accessible at renewal.
Financial Counselling Australia’s Coordinator of Disaster Recover, Louise Hayes, said the practice was a clear example of the poverty premium, where people on lower incomes or under financial pressure pay more for essential goods and services because they cannot afford the cheapest upfront option.
“People who are already stretched should not be charged more because they cannot pay a full year of insurance in one hit,” Ms Hayes said.
The report found some renewal notices failed to clearly show how much more customers would pay by instalment, instead using vague wording such as annual payments “may” be cheaper or instalment fees “may” apply.
Financial Rights Legal Centre Principal of Policy Development Drew MacRae said consumers needed clear information to make informed choices in a cost-of-living crisis.
“This report on general insurance pricing transparency is timely given it comes on the heels of the recent Budget announcement that the government will develop and consult on options to improve clarity around the basis of home and contents premiums,” Mr MacRae said.
“Consumers have been kept in the dark for too long on what contributes to their premium price and what they can do to reduce that price.”
“For the insurance market to work properly, consumers need appropriate information to make an informed decision, and the practices highlighted are unfair and financially penalise the people who need a break the most.”
Ms Hayes said this is a wakeup call for the insurance industry.
“If some insurers can avoid charging people more to pay by instalments, and others can clearly disclose the extra cost, then the whole industry can do better,” Ms Hayes said.
It’s time for insurers to clearly disclose the total cost of each payment option at renewal, remove unnecessary instalment penalties, and ensure customers are not locked into higher-cost payment arrangements when their circumstances change.
ENDS
Media contacts: Financial Counselling Australia: Maura Angle, 0418 334 121. Financial Rights Legal Centre, Drew MacRae 0404 604 978.