Lucy and Michael* complained they couldn’t afford their life insurance premiums, which had increased nearly three-fold. Since turning 80, Michael’s monthly premiums had gone from $49 to $190 per month. Lucy and Michael said they were misled about the increases when changing their insurance plan, asking for a refund of $8,820 of the premiums paid.
The couple’s insurer explained that, following Michael’s 80th birthday, the policy’s premium structure had changed to “rate for age”. Their premium type was “Level to age 80”, meaning premiums remained the same until Michael reached 80 years of age, after which the premium type converted to “Rate for Age”. The insurer explained that, because Michael had turned 80, it could increase the premiums on the anniversary date.
However, the couple felt misled, saying their financial adviser never explained what “rate for age” would entail. Lucy said she distinctly remembered him saying they “wouldn’t need to worry as the premiums would stay the same”.
On obtaining the financial adviser’s file, the insurer found that Lucy and Michael had wanted to replace the policy “to lower life cover costs as age rises.” It found that, while the premiums had increased, they would have paid more overall if they had continued with their original policy.
The IFSO Scheme agreed the policy allowed the insurer to increase the premiums, and that there was insufficient evidence proving the couple were misled.
Complaint not upheld
Consumers need to understand that premiums can increase with age – it will depend on how the policy is set up; either “level” to a certain age, or “stepped” to increase premiums incrementally.