Of all life insurance complaints during the financial year 2020-21 income protection received the most highlighting the continued issues within the income protection market.
Data from the Australian Financial Complaints Authority (AFCA) found life insurance accounted for 1,623 complaints. When the data was broken down by product income protection accounted for 575, followed by term life (290), total and permanent disability (184), funeral plans (169), and trauma.
“AFCA continues to receive many complaints about the calculation of income protection benefits, especially for business owners and the self-employed. Around a third of life insurance complaints (575 complaints) were about income protection policies,” it said.
“AFCA understands the difficulties presented by complainants’ corporate and trust structures, and the complexities of business accounting.”
Since 1 October, the Australian Prudential Regulation Authority (APRA) required insurers to make changes to income protection policies that were sold after 1 October in a bid to stem the losses the life insurance industry had experienced from income protection.
In terms of issues, incorrect premiums received the most complaints at 213, followed by denial of claim (212), delay in claim handling (172), service quality (141), and misleading product/service information (109).
“Complaints about incorrect premiums were commonly about the rate at which stepped premiums increase over time. These complaints are often exacerbated by financial firms not clearly explaining how stepped premium curves will affect future premium rates,” AFCA said.
“AFCA encourages firms to provide clear and effective premium rate tables, or premium projections, to consumers at the point of sale or during renewal periods to help reduce the number of premium disputes.”
AFCA noted the average time it took to close a complaint was 128 days.
Of the 70,510 complaints the authority received during the year, life insurance accounted for 2% which was consistent with the previous two years.
Over the year, the largest insurers had the most complaints against them with AIA at 339, TAL at 312, AMP at 295, MLC at 211, OnePath at 182, and Westpac Life Insurance Services at 150.