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Determination
Case number | 12-00-1038677 |
Financial firm | Allianz Australia Insurance Limited |
Case number: 12-00-1038677 23 August 2024
The complainant had landlord insurance with the financial firm (insurer) from 29 December 2010 until 9 November 2023, when he cancelled the policy.
When the policy renewed on 29 December 2022 the insurer significantly increased the annual premium to $5,087.24, from $1,520.88 in the previous period.
The complainant says he was not aware of and did not agree to the increased premium. He seeks a refund of $3,300 for the premium paid from 29 December 2022 to 9 November 2023.
The insurer declined the complainant’s request for a refund of the premium, as it was on risk for the period covered. The insurer offered to back date the cancellation of the policy by 90 days, however the complainant declined that offer.
No. The insurer is not required to refund any premium paid by the complainant.
AFCA can only consider the amount of a premium where there was non-disclosure, misrepresentation or incorrect application of the premium based on the practices generally applied by the insurer. We cannot make a determination about the rating factors and weightings an insurer applies to determine the base premium.
The outcome is fair because no error in the details used to determine the premium has been shown. I am satisfied the premium increase was based on rating factors and weightings applied by the insurer, specifically the flood risk. There was no misrepresentation or failure to disclose the premium, and no breach of a legal obligation or duty has been shown.
Considering AFCA’s limited jurisdiction to review premium pricing, and noting the complainant accepted the renewal terms by paying the premium instalments, it would not be fair to require the insurer to reimburse premiums charged to cover the risk after the cover has ended.
This determination is in favour of the insurer.
The insurer is not required to refund the premium or take any further action in relation to the complaint.
No. The insurer is not required to refund any premium paid by the complainant.
The premium charged by an insurer is a business decision and is not generally open to review by AFCA. If a customer considers the premium set by the insurer is too high, it is open to them to review their cover or seek alternative insurance with another insurer.
However, AFCA’s rules allow review of complaints about premium prices where there has been:
AFCA cannot consider a complaint about commercially sensitive rating factors and weightings applied by the insurer to determine the base premium.
While AFCA accepts the insurer has commercial liberty to set the level of its premiums, this is not an absolute freedom. If the level has increased disproportionally without justification, AFCA may review such an increase and consider whether the insurer determined the premium fairly.
However, in the absence of any error or inadequate explanation for the premium increase, AFCA cannot compel the insurer to refund or reduce the premium.
The complainant says the premium was increased without his consent. He says the insurer should not be able to increase the premium on an automatic renewal without his written or verbal consent.
The renewal notice sent to the complainant on 23 November 2022 specified the monthly instalment amount twice on the first page, including in bold in a summary of the policy details at the top of the page. It said the complainant’s policy would expire on 29 December 2022, but because he had chosen to pay by direct debit it would automatically renew. The notice said to contact the insurer if the complainant did not want to renew, or to opt out of the auto renewal process.
The policy schedule set out the annual and monthly premium, the previous year’s premium and separately identified the flood premium, which was noted to be optional cover. A supplementary product disclosure statement was also enclosed which noted the policy could be cancelled at any time.
The complainant acknowledges receiving the renewal notice but says he gets a lot of emails and tends to skim read them and did not notice the increase until the following November.
I am satisfied the policy documents were sent to the complainant and clearly set out the applicable premium, renewal process and what the complainant should do it he did not want the policy to renew. The insurer did not misrepresent or fail to disclose the premiums to the complainant.
The complainant says it is not reasonable for the insurer to increase the premium by over 200%. He says the insurer should have obtained his written or verbal consent for such a significant increase. He also disputes the addition of loss of rent and damage by tenant cover to the policy. He says he did not agree to the renewal of his policy on the terms offered, and would not have consented to the increased premium if he was aware of it.
The complainant has a responsibility to review the terms offered by the insurer and determine if it suits his needs and circumstances. Malicious damage cover and loss of rent after an insured event had been included in the policy since at least February 2021. These were not optional covers. If the complainant did not want cover for these items, he could have selected alternative insurance. The insurer says these items were not a factor in the December 2022 increase as they are standard inclusions in place in previous years.
The insurer notes the complainant did not contact the insurer about the renewal until November 2023, when he first removed flood cover and then cancelled the policy. The complainant acknowledges he did not take any steps to review the insurance arrangements offered by the insurer before that time.
The complainant paid the premiums by direct debit. By paying the premiums as they fell due, the complainant confirmed his acceptance of the renewal offer, as he had done in previous years. The complainant does not dispute the policy renewed on this basis in previous years, but considers this should not have occurred when a large increase was applied.
The renewal process is set out in the policy. It says the insurer will send a renewal invitation each year and let the complainant know the renewal cost. Where a premium is paid by direct debit, it says the insurer will automatically renew the policy unless the complainant tells it to stop.
I am satisfied the complainant was informed of the premium increase and renewal process, and was given adequate notice to review his arrangements before the period of cover began. He was also entitled to cancel the cover at any time. As he did not, I am satisfied he consented to the renewal of the policy in accordance with its terms.
Insurer has explained the change in premium
The complainant does not dispute the property is a flood risk, and says this has been known since at least the 1970’s. He says the insurer has not explained why there was any greater risk of flood to the property in 2022 compared to previous years. He considers the insurer has overestimated the flood risk, and disputes the modelling used by the insurer to determine the level of risk.
The insurer says it completed a review of its flood portfolio in early 2022, which included changes to its assessment of the flood risk in some locations, including where the complainant’s property is situated. It says it reassessed the flood risk based on updated data (including elevation and rainfall information) which informed its review of the risk at the address. Changes to the flood rating of the property were implemented in the complainant’s renewal in December 2022 after the flood review.
The insurer’s published premium guide states it may change the importance of any risk factors and how they affect the premium over time. It says insureds should be aware the premium charged is likely to be changed at renewal even if there is no change to the circumstances of the property, as other factors affect the premium such as the cost of claims paid or expected, data collected by the insurer and other commercial considerations. Flood is identified as an important factor affecting pricing.
The insurer says it applies a flood rating to an address based on its assessment of the risk of flooding considering flood return periods of different heights. The complainant’s property was given the highest flood rating due to its proximity to the Yarra river and other bodies of water. The insurer provided information showing the property was in a flood risk area and that similar premiums applied to comparable properties near the complainant’s. I am not persuaded the complainant has shown the insurer calculated the premium incorrectly based on the practices generally applied by the insurer following its flood review.
The insurer confirmed the premium was calculated correctly based on the revised rating, which is supported by the similar quotes provided for comparable properties in the area. I am satisfied the increase in the complainant’s premium was largely due to the insurer’s revised assessment of the flood risk to the property, and that no error in calculating the premium has been shown.
While I acknowledge other insurers offered the complainant a much lower premium, the insurer is entitled to make its own assessment of the risk and determine the weightings it applies, and these factors cannot be reviewed by AFCA.
I am satisfied the insurer has provided a reasonable explanation for the premium increase based on its revised assessment of the flood risk at the property.
The available information does not show the insurer calculated the premiums incorrectly, or misrepresented or failed to disclose the premiums to the complainant. The complainant has not identified any breach of a legal obligation or duty by the insurer. Considering these factors, there is no basis for AFCA to require the insurer to refund premiums paid for cover already provided to the complainant.
The insurer is not required to refund the premiums paid by the complainant or take any further action in relation to the complaint.
AFCA can only consider the amount of a premium where there was non-disclosure, misrepresentation or incorrect application of the premium based on the practices generally applied by the insurer. We cannot make a determination about the rating factors and weightings an insurer applies to determine the base premium.
The outcome is fair because no error in the details used to determine the premium has been shown. I am satisfied the premium increase was based on rating factors and weightings applied by the insurer, specifically the flood risk. There was no misrepresentation or failure to disclose the premium, and no breach of a legal obligation or duty has been shown.
Considering AFCA’s limited jurisdiction to review premium pricing, and noting the complainant accepted the renewal terms by paying the premium instalments, it would not be fair to require the insurer to reimburse premiums charged to cover the risk after the cover has ended.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all the information the parties have provided.
While the parties have raised several issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
