Insurer 'adequately' disclosed stepped premiums, cover extension: AFCA

An AIA income care policyholder who complained the insurer extended his policy up to age 70 without informing him and raised his monthly premium by 450% instead of 9.5% as stated in a letter has lost his dispute.

His claim that the insurer wrongly classified his occupation as a clerk, an error he believed may have affected his premium increase from December 2020, was dismissed too by the Australian Financial Complaints Authority (AFCA).

AFCA says the extended cover to 70 years of age was a feature of the policy and notes that the insurer had informed him more than once about the extension provision. He was first informed about it in December 2009 in a product disclosure statement (PDS) when his policy commenced that same month and in an annual statement in December 2020 that the extension would be applied ahead of its implementation.

The ombudsman says the annual statement sent to the policyholder over the years had clearly asked him whether his circumstances had changed and if they had, he should seek advice from his adviser, who had arranged the cover for him.

“The extended cover was a feature of the policy that was adequately disclosed to the complainant,” AFCA says. “The onus was with the complainant to tell the insurer that he did not need the extended cover.

“That is why the annual statement dated December 9 2020 disclosed and reminded the complainant of the extended cover feature.”

On the premium increase, AFCA says the annual notices issued from 2010 to 2020 showed the policy was subject to the stepped premium rate option, whereby rates increased each year with the age of the insured.

The policyholder was also informed about the stepped premium rate option when his cover commenced, in a policy schedule and policy statement that were issued with the welcome letter. The policy statement said future premium rates are not guaranteed to be the same as current rates and that the insurer “reserves the right to change these” for all policies in a group.

And the insurer had notified the policyholder of the premium increase about 10 weeks before it was to be applied in December 2020, giving him time to seek advice about his options including whether he should continue with the cover.

In the notification letter, the policyholder was told rates would go up 9.5% from the policy anniversary date and that the new premium amount would include all changes to his premium and not just the percentage set out.

“This may include changes due to age, the end of discount or the cover increasing due to indexation,” AFCA says. “In my view, the insurer increased the stepped premiums… in accordance with the policy terms and conditions. The insurer adequately disclosed this, it did not mislead the complainant and it did not breach any obligation.”

Click here for the determination.