MLC failed to give the required one month’s written notice when it raised the critical illness premiums of a policyholder, the Australian Financial Complaints Authority (AFCA) says in a dispute ruling.
The policyholder had disputed the increases, saying he was misled by the insurer about how the increases tied to annual rises in the benefit would work.
MLC also increased the underlying premium rates and the complainant says he was misled to believe that would not happen.
AFCA says the insurer did not mislead the complainant, as information provided to him when he took up the policy showed that premiums would increase by more than the rate of CPI benefit increases and that underlying premium rates could change.
But the ombudsman determined MLC did not give notice of the change to premiums in 2014, 2015 or 2016 in accordance with its policy terms or that of the Corporations Act.
Section 1017B of the Corporations Act requires an insurer to give 30 days’ notice of material changes and significant events that relate to the policy.
“In AFCA’s view, a change to premium rates is a significant event and requires notice under [the Corporations Act],” AFCA says in the ruling.
AFCA says the complainant’s policy states the insurer is required to give one month’s written notice but the notices sent to him in 2014, 2015 and 2016 do not mention or even suggest that the insurer has changed its premium rates.
“Because the complainant’s policy also had premium increases associated with CPI benefit increases, it was not obvious to him that premium rates had changed,” AFCA says.
AFCA says because MLC did not give notice, the insurer was not entitled to raise rates on the complainant’s policy in 2014, 2015 or 2016 and must refund him the amount of the premium rises associated with the increases for those years.
The ombudsman rejected the insurer’s position that the 2014 and 2015 rate increases did not fall within AFCA’s jurisdiction since they happened more than six years before the complaint was lodged.
AFCA says since the insurer did not give notice of the increases, the complainant was unaware of
those increases, and therefore of his loss.
“I am not satisfied he should reasonably have been aware of them until the insurer told him about those increases, which was within the six-year time limit,” AFCA says.
AFCA also dismissed a previous determination raised by MLC involving a dispute over a similar matter. The ombudsman says previous determinations must be taken into account but are not binding.
“Consistency is an important, but not overriding principle in decision-making,” AFCA says, adding it has considered the previous ruling’s findings.
“The determination does not explain how a notice that does not say premium rates have changed satisfies the requirement to provide a written notice that premium rates have changed,” AFCA said.
“I have taken the determination into account, but have decided not to follow it. I do not agree with its findings about [section 1017B of the Corporations Act].”
Click here for the ruling.