Canberra retiree Warren Vant was convinced Coles Insurance had made a terrible mistake.
Why else had his home insurance premium skyrocketed by 109 per cent?
“[I was] very surprised,” Mr Vant said.
“I just couldn’t see how they could come up with such a high figure.”
Mr Vant is one of a growing number of Australians demanding answers from insurers about why their premiums have soared.
Complaints about general insurers to the Australian Financial Complaints Authority (AFCA) are at record levels, with premium and fee disputes up by 41 per cent last financial year.
The cost of insurance increased 14 per cent in the year to September, outstripping all other products and services, according to the Australian Bureau of Statistics’ latest inflation figures.
The insurance industry has previously blamed growing premiums on increasing natural disasters, rising home values, higher repair costs and other inflationary factors like reinsurance costs.
It has also denied engaging in price gouging and says Australian insurers lost significant amounts on home insurance over the last four years.
In a recent AFCA decision, Suncorp was forced to scrap a 60 per cent home insurance price hike, because the insurer failed to justify the increase.
However, Mr Vant’s quest to hold his insurer accountable has left him disappointed.
AFCA refused to consider his case, finding it was outside the rules.
Warren Vant’s case was rejected by AFCA. (ABC News: Joel Wilson)
It is one of three cases the ABC has uncovered where the financial ombudsman has refused to consider claims of excessive premium rises due to its narrow jurisdiction.
Under AFCA’s rules, the ombudsman can only review premium increases under limited circumstances, such as the premium being incorrectly applied, where there’s non-disclosure, a breach of the law or misrepresentation by the insurer.
An example it gives is when there has been a disproportionate increase and the insurer has provided no justification.
Mr Vant said he couldn’t see a substantial difference between his case and the successful Suncorp claim, and claimed AFCA was rejecting “quite serious matters”.
Consumer advocates including former Australian Competition and Consumer Commission boss Allan Fels and the Financial Rights Legal Centre’s Alexandra Kelly share his concerns.
They are calling for an urgent review.
“I’m very concerned that some of these [rulings] seem very inconsistent as to what matters are going through to case management and matters that are being rejected at the rules stage,” Ms Kelly said.
“In reviewing Warren’s case, I’m concerned that his matter did not get the due consideration it needed and that it was unfairly rejected.”
Professor Fels added that AFCA needed “to explain clearly once and for all, whether it looks at excessive-looking price rises or not”.
Following the ABC’s inquiries, the financial ombudsman announced it would conduct an internal review.
In a statement, AFCA said it had “very limited jurisdiction”, and each case was dependent on specific facts.
A rise after 40 years of no claims
Warren Vant took his concerns to AFCA, but it refused to look at his case. (ABC News: Joel Wilson)
Warren Vant sought an explanation from Australia’s biggest general insurer, Insurance Australia Group (IAG), about why his Coles Insurance premium had soared from $440 to $925.
He’d lived in his 1970s brick veneer house for almost 40 years without making a claim and ACT government maps showed his suburb wasn’t bushfire or flood prone.
While he was ready to accept an increase of up to 30 per cent due to the increased costs faced by insurers, he believed this was excessive.
“In my complaints, I did raise the question of profiteering,” Mr Vant said.
The insurer told him increasing natural disasters and rising costs were to blame and cited more general factors like “recent modelling, wider insurance trends and other commercial considerations”.
“I was angry about their attitude,” Mr Vant said.
“If they could justify it, fair enough, but they weren’t giving me enough information.”
Warren Vant ended up moving to a different insurer, but wanted to hold IAG accountable. (ABC News: Joel Wilson)
Professor Fels believes Mr Vant may have been unfairly slugged.
“It looks like price gouging. There’s no credible explanation of why it’s gone up 109 per cent,” he said.
IAG’s insurance profit jumped 79 per cent to $1.4 billion last financial year.
It says underlying insurance earnings are up 27 per cent.
Mr Vant believed he had a strong case because he owns a similar property next door which also had a landlord policy with Coles Insurance but its premium increase was only 49 per cent.
He shopped around and found far cheaper coverage with a different insurer, saving more than $220.
IAG wrote to the ombudsman asking that it reject his case, arguing it was outside the rules.
AFCA agreed, finding Mr Vant had not demonstrated the premium was incorrectly applied, and explaining the ombudsman had no powers to compel IAG to provide “commercially sensitive material”.
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Ms Kelly said in reasonable cases, the ombudsman should force an insurer to provide specific justification and review the firm’s calculations.
Without that, she feared consumers like Warren Vant were at a significant “power disparity”, with no way of accessing the information necessary to mount a case.
IAG declined the ABC’s interview request, but in a statement said Mr Vant’s premium had risen after a shift to a new pricing model.
“This model provided an updated assessment on storm risk and potential impact at the customer’s property,” it said.
IAG also said inflationary pressures and the frequency and severity of extreme weather events were to blame.
Landlord believes insurance rise was ‘price gouging’
Tiffany Cestnik’s insurance premiums were going to jump 175 per cent in one year. (ABC News: Patrick Stone)
Tiffany Cestnik, another homeowner whose premiums more than doubled this year, is still hopeful she can hold her insurer to account.
Her complaint is under consideration by AFCA.
In August, QBE jacked her premium for landlord insurance up 175 per cent.
“My first reaction was to think that they’d made a mistake, that they’d actually sent me someone else’s premium,” she said.
The cover was for an investment property on the Gold Coast where Ms Cestnik had not made any claims, and there hadn’t been any fires or flooding.
The house is located in a new estate near the Coomera River but the council’s flood risk awareness map shows it would only be impacted in a “very rare to extreme” flood event.
Tiffany Cestnik saved thousands of dollars by changing to a different insurer. (ABC News: Patrick Stone)
After learning of the increase and changing insurers, Tiffany saved almost $4,000.
QBE blamed the premium rise on the increased amount of building cover, a 10 per cent introductory discount expiring and a change to flood rating information.
“[I believe] It’s price gouging,” Ms Cestnik said.
“After an investigation by QBE themselves, I still didn’t receive a satisfactory response.”
QBE’s average premium increased sharply by 12.5 per cent for Australian and Pacific customers last year.
The company declined to comment on the specifics of her case because it remains before AFCA, but in a statement said, ” the premium was calculated based on the information available.”
“We continually refine our risk models to enhance hazard identification and adjust risk pricing accordingly.”
Calls for new body to monitor insurance prices
Ms Kelly believes a new independent body is urgently needed.
She’s calling for a national insurance price monitor — based on previous models in NSW and Victoria — to investigate the pricing practices of general insurers.
“There’s really no cop on the beat that is looking specifically at pricing and so there is a real risk that consumers are being significantly gouged,” she said.
One of those examples is the NSW Emergency Services Levy Insurance Monitor, which Professor Fels ran until 2020.
The monitor recovered more than $14 million from insurers over-charging premiums.
It also produced analysis which found existing customers were charged more than new customers, dubbed a “loyalty tax”, and some insurers were quoting more than double the price for home insurance on identical properties.
Professor Fels supported the need for a federal price monitor.
“It’s quite concentrated, and [so] it’s a bit easier to get away with high prices,” he said.
“You need some kind of external pressure.”
A parliamentary inquiry into climate risk and premiums this week recommended the ACCC be directed to monitor premium prices across Australia, and insurance companies be required to provide customers with a sufficient breakdown and explanation of premium costs.
The Insurance Council said it would consider the report’s recommendations.
Assistant Treasurer Stephen Jones said in a statement that the federal government was “considering a range of options to make insurance more affordable for families and businesses”.
“At the last budget, we set up a taskforce to coordinate a whole of government response to reducing natural disaster risk and insurance costs,” he said.
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