The Insurance Contracts Act should be amended to require companies to give clear information on reasons for premium increases, ensuring the risk signal supports resilience and helps affordability, a report on home and contents renewals says. 

The Choice and Financial Rights Legal Centre report says insurers often describe home insurance premiums as a signal of the risk attached to a property, but consumers need not only a price, but information they can understand and act upon. 

“Insurers know more about the risks facing our homes than anyone else, yet consumers are routinely given a premium increase without any meaningful explanation of what's driving it,” financial rights principal of external relations and advocacy Julia Davis said. 

“We're getting the signal, but not the information needed to respond to it.” 

An analysis of 75 homeowner renewal notices found premiums commonly rose 10% to 20%, but none explained why an individual’s premium had increased, while generic possible causes leave customers unable to tell if their home has become riskier or an increase reflects matters beyond their control. 

A survey of 831 consumers showed 71% of policyholders did not understand why their premium had increased and 73% felt it was unfair. 

Households that formally escalated requests for more information still failed to gain a tailored explanation, while those calling about increases often received advice centred on reducing coverage or increasing excesses, transferring risk to consumers rather than helping make their homes safer. 

Existing laws, industry codes and Australian Financial Complaints Authority decisions provide some rights around pricing decision information, but protections “stop well short” of requiring genuine transparency, the report says. 

Insurers cite commercial sensitivity, but the report says credit reporting sector experience shows changes can be made without disclosing proprietary methodology. 

The recommended Insurance Contracts Act amendment would require identification of factors contributing to increases or decreases, relative weightings and information about mitigation responses. 

Renewal notices should provide last year’s premium alongside the current price and a descriptive analysis of why there’s a material change, it proposes. 

Other recommendations seek expansion of the Resilient Building Council’s resilience rating system, insurer consideration of property mitigation measures and a new national pricing monitor.

It notes encouraging action by insurers regarding council bushfire ratings, but says verifiable mitigation adoption should be expanded nationally and to all controllable risks that households could reduce. 

The report, Signal Failures What are insurers telling us with their pricing?, is here.