Seven general insurance companies will be asked to 'please explain' their methodology and assumptions in setting premium rates for contracts extending past 1 July 2000, Australian Competition and Consumer Commission Chairman, Professor Allan Fels, said today.
'The insurance industry has been the subject of a significant proportion of complaints and inquiries to the ACCC's Price Exploitation Hotline,* with more than 25 per cent of callers having queried their insurance accounts.
'As a result, the ACCC has urged insurers to provide clearer statements to consumers as to how the Goods and Services Tax component has been reckoned.
'But, importantly, the ACCC also found there are a number of instances where individual companies have implemented, or are proposing changes to, premium rates that are beyond the range suggested by the ACCC.
'Consumer complaints have ranged widely and include compulsory third party policies which expired before 1 July but which charged a GST and the marking of charges as 'tax' - which consumers assumed to be GST - when it related to stamp duty.
'Consumers seeking explanations from their insurers have complained that they were further confused by the company's response.
'And the investigation has revealed differences in premiums for similar products - so consumers should shop around.
'The ACCC will now issue a Notice to seven of 21 general insurance companies seeking further detail and substantiation of their premium changes.
'If insurers do not satisfy the Notice, the ACCC may:
- issue a Notice that price exploitation has occurred;
- set a maximum price for the supply; or
- recommend that particular insurers and their classes of products be declared under the Prices Surveillance Act 1983.
'The ACCC believes insurance premiums generally should rise by less than 10 per cent. This has been confirmed by preliminary actuarial work undertaken as part of this investigation.
'The ACCC notes that some insurers have been under strong pressures - unrelated to the tax changes - to lift premiums over the next year. These include high underwriting losses due to costly natural disasters such as the Wollongong floods and the Sydney hailstorm
'These are more substantial than the tax change for some classes of insurance. Premium rate increases due to these factors are being confused with or, worse still, passed off as new tax system-related premium rate changes', he said.
The ACCC will continue to monitor price changes in the insurance industry during the tax change transition period.
*The ACCC Hotline is 1300 302 502.