This fact sheet is for information only. It is recommended that you get legal advice about your situation.
Robert took out pet insurance shortly after he got his new puppy. His policy has just come up for renewal, and the new premiums have doubled. In the first year of his puppy ownership, Fido was treated after he fell off the couch and hurt his leg.
Like other businesses selling products and services, insurers are largely free to charge whatever they want.
The insurer’s commercial decision about how they set premiums is generally not capable of challenge, except on very narrow grounds which include:
- Breach of specific legislation, such as anti-discrimination laws. Unfortunately these anti-discrimination laws also give insurers exemption allowing them to discriminate where they are relying upon actuarial or statistical data.
- Breach of contract – always read the wording of your own policy very carefully. Most policies do not allow the insurer to change premiums during the duration of the policy (usually yearly). A small number of policies will expressly provide for protection against premium increases, or guarantee renewal.
- Misleading or deceptive conduct or advertising when you first took out the policy. The remedy for this is not straight-forward, but generally does not force the insurer into maintaining lower premiums forever. You should seek legal advice if this has occurred.
A dedicated fact sheet on flood premiums for home insurance.
What happens on renewal?
Many general insurance policies (such as home and contents, car insurance and pet insurance) are renewable insurance cover, what this means is they cover you for a set period (generally a year). Once the period expires your insurer can choose whether to offer renewal and on what terms. They have to notify you in writing of these changes by sending you a renewal certificate and updated policy documents (if changes are made) – but they generally do not need to highlight these changes beyond sending out the renewal.
TIP: Always read your renewal documents very carefully.
You need to know if your insurer has changed any of part of your contract (like dropping “agreed values” over time or increasing your excess!)
You also need to comply with your Duty of Disclosure which is the responsibility to keep the insurer informed of any changes that is relevant to their risk in providing you with insurance. Insurers will refuse to pay out on a claim if they never would have covered you in the first place.
Premiums often increase each year to reflect:
- the higher risk of a claim being lodged as the insured (you or your pet) gets older;
- changes to government taxes;
- cost of claims paid to other customers, and claims expected to be paid in the future;
- reflect your claims history;
- new and updated data used to calculate premiums;
- any other factor the insurer believes is relevant to their risk.
These increases can be significant and can increase more each year.
The general rule for most policies is that:
- your yearly premium payment is for cover for that one year only;
- your insurer does not have to renew your policy; and
- you are not entitled to a refund of any past premium payments just because you did not claim during the period.
There are exceptions, so always read your policy.
In rare cases, some policies will offer benefits like guaranteed renewal, level premiums, or an investment component where you would be entitled to a payout upon cancellation. You should seek legal advice if you believe you were misled.
Getting the insurer’s reasons
It the insurer:
- refuses to insure you;
- refuses to renew your policy; or
- by reason of some special risk relating to you or to the subject-matter of the contract, offers insurance cover to you on terms that are less advantageous to you then it would to others (i.e. increases your premium more then someone else)
You can request reasons in writing under section 75 of the Insurance Contracts Act. You must do this in writing.
What can you do if you think your insurer is wrong?
You can try negotiating with your insurer. Some insurers will offer discounts such as for loyalty. If you have information that reduces the insurer’s risk, the insurer may reassess your premiums (for instance, if your house is in a flood area is on stilts or on the top of the hill).
If you cannot resolve the issue directly with your insurer, there is also the Australian Financial Complaints Authority (AFCA, 1800 931 678) which is a free consumer complaints resolution body. AFCA only has a very narrow jurisdiction to investigate complaints about the amount of fees, premiums, charge or interest rate – the main categories are:
- incorrect application of the fee, premium, charge or interest rate based on scales or practices generally applied by that insurer or agreed with you;
- a breach of any legal obligation or duty.
What else can you do?
You can shop around and see if you can find more suitable cover elsewhere.
You need to be careful because:
- Cheaper policies can mean less cover and less benefits. You should read the policy document in full as coverage can vary significantly between policies
- You have a Duty of Disclosure to advise the insurer of every matter that is known to you or a reasonable person in your position which is relevant to the decision of the insurer whether to accept the risk of offering you insurance
- You may lose your accrued benefits in being with the same insurer. Pre-existing conditions may be excluded from cover, regardless of whether you disclosed or not. “Pre-existing conditions” often broadly defined and you can be excluded for having symptoms of a condition even if not diagnosed or investigated yet
- You may be subject to a waiting period before you can claim
Need some more help?
See Fact Sheet: Getting Help for a list of additional resources.
Last updated: October 2018.