Consumer Advocates Criticise Insurers Over 'Poverty Premiums' and 'Loyalty Taxes'

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Consumer advocacy groups have voiced strong opposition to the insurance industry's decision to reject recommendations designed to eliminate practices that disadvantage consumers, including charging higher rates for monthly bill payments and increasing renewal premiums for loyal customers.

The Financial Rights Legal Centre has cited ongoing reports from consumers being adversely affected by these pricing practices, which they refer to as a "poverty premium" and a "loyalty tax."

The Insurance Council of Australia (ICA) recently published an action plan in response to 150 recommendations from the parliamentary floods inquiry and a comprehensive review of the industry code of practice. Despite the consensus among both reviews that insurers should not charge more for monthly payments than they do for annual ones, and renewal premiums should not surpass those offered to new customers, the ICA asserts that enforcing pricing policies is not within the code's remit due to competition law restrictions.

Continuous concerns have been raised about the code's enforceability and the numerous recommendations the ICA did not fully endorse. Financial Rights Legal Centre's Drew MacRae stated that around 38 recommendations are still under consideration, or have been delegated to individual companies to decide upon.

Financial Counselling Australia has expressed significant concern that the ICA's action plan does not actively address inequitable pricing practices. According to their disaster recovery co-ordinator, Louise Hayes, it is essential for insurers to address these unfair practices and incorporate them into the industry code to ensure accountability and equity.

While the ICA's action plan includes some positive initiatives, such as a framework for assisting vulnerable customers, it also drew criticism for lacking a firm commitment to enforceability. The recommendations from the inquiry suggested these policies should be embedded contractually within product disclosure statements to strengthen consumer protection.

Stephanie Tonkin, CEO of Consumer Action Law Centre, highlights the importance of rebuilding consumer trust, especially following the response to the 2022 floods. She stresses that the industry's focus should shift more towards customer welfare rather than profitability, with enforceable actions driving this change.

ICA CEO Andrew Hall noted that the action plan aims to guide industry changes over the coming years with a central focus on enhancing the customer experience. He acknowledged the necessity of collaborating with consumer advocates, regulators, and the government to tackle the underlying issues cited in the reviews.

Published:Wednesday, 26th Mar 2025
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Leadership Transition at NTI: Janelle Greene Named New CEO

13 Feb 2026: Paige Estritori

National Transport Insurance (NTI), Australia's premier transport and logistics insurance provider, has announced the appointment of Janelle Greene as its new Chief Executive Officer, effective July 1. Greene, who currently serves as NTI's Chief Customer Officer, will succeed Tony Clark, who has led the company for the past 18 years. - read more

Decade-Long Battle Ends in TPD Payout for Injured Truck Driver

13 Feb 2026: Paige Estritori

In a significant ruling by the Australian Financial Complaints Authority (AFCA), a truck driver has been awarded a total and permanent disability (TPD) benefit, concluding a protracted dispute that spanned over a decade. - read more

NHVR's Revised Master Code: Broader Safety Guidelines for Heavy Vehicle Users

13 Feb 2026: Paige Estritori

The National Heavy Vehicle Regulator (NHVR) has recently updated its Master Code of Practice, marking the first revision since its initial release in 2018. This comprehensive update extends its reach beyond traditional road transport businesses to encompass a wider array of industries that utilise heavy vehicles, including manufacturing, construction, mining, retail, and logistics. - read more