Maybe not so much with car insurance where you can shop around easily every year, and not so much with health insurance where the price increase is currently controlled by government – but this is something that you need to check if you have life insurance, including trauma insurance, income protection, and the like – do not be a victim of price gouging. Judge it yourself !
The Price Gouging
As part of security, even for life insurance company, I have spread the amount to several insurance company. Yes, it will be additional hassle for my wife or children to claim to 3 different companies should I die later, but it will be safer and preferable rather than found out that they found out that the only insurance company that cover me go bankrupt. (And it’s not my problem any way :-))
Therefore, I know exactly that annual increase of premium and cover to align with CPI is something common and usual to be done on your policy. Of course, if the cover increased from $400,000 to $412,000 (3% increase to combat inflation) then it is only normal if the premium also increased by about the same amount.
But how about if the cover increased by only 3% (CPI) and the premium is increased by 13%? Will you accept this? Maybe, yes if you given the trick below….
This is the (new?) modus operandi:
- Offer customer good prices at first year of the premium. In this case I took $400,000 life insurance policy with $508.68 annual premium /$42.39 monthly. It’s not the most competitive life insurance in the market at level of 0.12% premium – but it’s still okay. (My other insurance giving me 0.07% premium – almost double (1.7x) but still quite competitive)
- Increase the premium massively a year later in order to “cope” additional profit under something that obvious and looks “normal” but it’s not that honest.
This is word for word (see picture for scanned letter):
“Each year as your age increases, your premium is adjusted to reflect your current age. Present amount $42.39 monthly, new amount $46.44” [This is already 9.5% increase]
“As an added benefit, we automatically increase your cover in line with increase in the Consumer Price Index (CPI) so your protection is not eroded by inflation. Life Cover: present amount $400,000 (amount payable $46,44) , adjusted for CPI $412,000 (amount payable $47.83)” [Another increase of 3% from the already increased premium – $46.44 is the figure after the increase based on “age”]
[So, practically the premium is increased from $42.39 to $47.83 – 12.8% as you adjust the cover to CPI]
And to make it honest and generous it also added:
“If you wish to decline the CPI increase, please contact us and we will reverse the increase”
I would say whoever choreograph the letter is so smooth. Try to say: “We have increase your cover by 3% and also increase premium from $42.39 to $47.83 – 12.8% – to prevent your cover eroded by inflation”
Try to complaint? Good Luck !
And to make inquiry about this is another long story:
- Of course, first stop is the customer service. You know what they say ? “Because this account is setup by phone, no form to fill, then it is high loading policy so the increase is high – if you want you can download the form bla bla bla…” The fact that it’s easy to take (without filling the form, etc), that the reason for customer (for me, at least) to take the policy
- A call to Office of Fair Trading give me a cold mean answer “we don’t have anything to do with insurance company”
- Call to APRA (Australian Prudential Regulation Authority – the insurance company body) only resulted suggestion to call either Financial Ombudsman, ACCC or ASIC
- And I got answer “You should talk to APRA” from Financial Ombudsman (1300 780 808 – http://fos.org.au/) when I call and explain to them
- ACCC (Australian Competition and Consumer Commission – http://www.accc.gov.au/ – 1300 302 502) said to me “we don’t control the price – nothing we can do, but of course you can just make a complaint” – I did lodge online complaint with ACCC – although with no expectation at all.
- And call to ASIC (Australian Securities and Investments Commission – http://www.asic.gov.au/ – 1300 300 630) just resulted advise to lodge a complaint from the website. I did lodge online complaint with ASIC – although also with no expectation at all.
From all 6 steps above, there is no positive indication that someone will look into this. Well, luckily I got this website of my own that I can write anything at all – At least ease of my frustration that it’s out there.
As for the policy , I just canceled it as if they already exploit me on the first year of the policy, can you expect a good treatment when you actually claim the policy ? I don’t think so …
So, my motivation is nothing but warn the general public – I have no more life insurance with the company. As you want to know, the life insurance company is Suncorp Metway Ltd (its subsidiary).
So? 13% annual increase with CPI… is this a price gouging or not?….