The industry watchdogs released a letter following life companies' assessments of past premium adjustments and related disclosure and marketing materials, as mandated by APRA and ASIC in December 2022.
The released letter comprised APRA and ASIC's insights and regulatory expectations regarding premium increases, disclosure and marketing materials, and product design based on the reviews conducted by life companies. It emphasised the industry's responsibility to meticulously design and price life insurance products, considering the lessons learned from previous shortcomings highlighted in APRA's December 2, 2019, letter.
Consumer dissatisfaction and reportable situations from life companies regarding premium increases in retail life insurance policies, prompted APRA and ASIC's intervention.
In their December 8, 2022, letter to CEOs of life insurance companies, both regulatory bodies urged a thorough review of past premium increases to ensure alignment with policy terms. They also emphasised the importance of transparent disclosure and marketing materials, providing policyholders with clarity on premiums and potential changes throughout the policy's duration.
The regulatory bodies also asked life insurance companies to contemplate the design of future products, with a focus on creating sustainable offerings with reasonable premium stability. Specific recommendations included clear communication of premiums and product details in marketing materials, the use of appropriate premium labels, and ongoing management of policyholders' expectations regarding premium increases.
Taking further steps, APRA and ASIC separately engaged with the Council of Australian Life Insurers (CALI) to explore industry-level improvements in disclosure practices, including accurate premium labels and effective management of consumer expectations.
After reviewing responses from life companies, APRA and ASIC conducted joint meetings to discuss the findings. They are currently evaluating whether additional regulatory actions are warranted.
While some life companies have initiated corrective measures in response to concerns raised in the December 8, 2022, letter, challenges persist.
Three companies identified instances where premium increases were applied without a clear right to do so, leading to ongoing remediation efforts. Meanwhile, others identified areas for improvement in various communication channels, with progress reported in some areas and ongoing efforts in others.
APRA and ASIC underscored the need for sustained industry efforts, noting key areas of focus for life companies, including the frequent re-rating of premiums, potentially misleading marketing materials, and challenges in product design that offer premium stability. They called on life insurance companies to ensure transparent contract terms, consider consumer impact in re-rate decisions, and enhance disclosure and marketing materials to facilitate consumer understanding.
APRA and ASIC have committed to monitoring life companies' progress over the next 12 months, assessing compliance with regulatory expectations in pricing decisions, marketing, disclosure, and product design.
