Fels Orders Insurance To Explain Sudden Rises In Premium
Sydney Morning Herald
Thursday June 14, 2001
The consumer watchdog has given insurance companies two weeks to explain why premiums have risen significantly in the past year, especially since the collapse of HIH.
Amid reports of 70 per cent rises in premiums this month, the chairman of the Australian Competition and Consumer Commission, Professor Allan Fels, said yesterday he had written to insurers demanding explanation for the increases.
The insurance industry has also drawn fire from consumer groups and the Financial Regulations Minister, Mr Hockey, after anecdotal reports of significant premium rises in the wake of HIH's downfall in March.
The Australian Consumers Association has also received reports of individual premiums rising by more than 70 per cent.
``Some of the individual rises have been very high," Professor Fels said. ``[We are looking at] the reasons for the rises, how big they have been, whether they have gone too high and whether they are excessive reactions to recent events like HIH."
Professor Fels said he was confident any negative findings would get ``serious attention" from the insurance industry.
``The insurance companies claim the rises are fully justified but I'm sure many people would like to hear our assessment of those claims," he said.
Professor Fels called on consumers to inform the ACCC if their insurance payments had jumped significantly.
Last Thursday, Mr Hockey said consumers deserved an explanation for the increases and asked the ACCC to investigate.
Ms Christine Chong, who renewed her home and contents insurance this month, said the premium had risen from $635 to $701, a jump of more than 10 per cent.
She said her insurance broker, who arranged the policy, signalled the collapse of HIH as a contributing factor in the rise.
``But how do you fight Goliath in the short-term when you need some type of cover," Ms Chong said.
``I only hope companies don't use this as excuse to weed out good clauses in their policies."
The Australian Consumer Association has launched its own campaign to monitor insurance premiums and many people have reported steep increases to the ACA's on-line forum.
Consumers have told the ACA of car insurance premiums that have more than doubled and home and contents premiums that have increased by more than 20 per cent in the past few weeks.
One consumer told the ACA his personal sickness and accident insurance with Australian Casualty and Life rose from $1,800 to $3,100, a rise of 72 per cent. According to the consumer, the insurer told him the downfall of HIH was a factor in the massive increase.
A survey last month by analysts JP Morgan and Deloitte Touche Tohmatsu found premiums rose an average of 15 per cent during the current financial year, before the extent of the HIH debacle was known.
The survey showed increases of up to 20 per cent on professional indemnity and liability insurance with some premiums, such as public liability and personal injury, soaring by more than 100 per cent.
NRMA, Australia's biggest general insurer, has acknowledged about 80 per cent of customers would pay increased premiums this year.
Consumers can contact the ACCC's insurance hotline on 1300 302 502.
© 2001 Sydney Morning Herald
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