Australia’s financial regulators have provided an update on life insurers’ responses to regulatory concerns over premium increases, product structures, and consumer disclosure practices.
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) began a joint review in late 2022 following rising policyholder complaints about premium volatility.
The review was prompted by evidence suggesting that repeated and sometimes large increases to life insurance premiums were not always applied in line with policy contracts or in ways that aligned with policyholder expectations.
Some products, especially those marketed under “level premium” structures, were found to be misunderstood by consumers, contributing to dissatisfaction and confusion.
By December 2024, Australians were spending about $9.4 billion annually on individually held life insurance purchased via financial advisers.
Insurers have attributed rising premiums over the past five years to factors such as age-based increases, cover indexation, and adjustments in base rates.
ASIC and APRA observed that many life insurers have acted on feedback, reviewing historical pricing practices and refunding overpayments where rate increases lacked a contractual basis.
Insurers also revised policy language to clarify when and how premium changes can occur. Vague terms such as “we may change premiums at our discretion” have been replaced with more detailed, standalone provisions explaining the conditions under which rates may shift.
Marketing materials and point-of-sale communications have also been revised. Legacy terms like “level” and “stepped” premiums have been replaced with CALI-endorsed labels: “variable premium” and “variable age-stepped premium.” These changes aim to make it clearer that all premiums may increase, depending on various factors.
While improvements in governance and communication were acknowledged, the regulators noted that more work is needed to stabilise premiums through product design.
Most insurers updated their target market determinations (TMDs) to better reflect the nature of premium variability, particularly for long-term insurance products.
However, efforts to fundamentally redesign offerings to improve sustainability and meet consumer expectations remain limited.
A small number of life insurers introduced new features – such as fixed premium periods or flatter pricing models – but widespread adoption across the market has yet to materialise.
ASIC and APRA continue to raise concerns over duration-based pricing, a model where new policyholders receive discounted premiums due to recent underwriting but face steep increases as discounts expire.
Insurers have been encouraged to ensure such pricing strategies genuinely reflect reduced risk and are disclosed in a way that allows consumers to understand long-term cost implications.
Most companies have updated disclosure documents to reflect these factors. However, ASIC warned that merely stating time-held policies may cost more is insufficient.
Regulators also recommended that insurers draw on practices developed for individual disability income insurance, particularly regarding sustainable pricing and product governance. APRA said it would continue to monitor these issues as part of its ongoing supervisory work.
