Following an ASIC review, six insurers have agreed to better inform consumers about their car insurance renewal practices to reduce the risk of consumers being caught by surprise by automatic renewals.
The review was prompted by complaints about some insurers from consumers and consumer groups. In some instances consumers reported that they had already purchased insurance with another insurer by the time they discovered that their previous car insurer had automatically renewed the insurance cover. In other cases, consumers reported having their bank account overdrawn by unexpected direct debits.
ASIC was concerned that some consumers were unaware that their insurer automatically renewed their annual car insurance policy by directly debiting their bank account or credit card, unless they actively opted out.
ASIC’s review identified that consumers were not always clearly informed by insurers, when first purchasing the policy, that it would automatically renew unless the consumer advised otherwise. In most cases consumers were only informed about the automatic renewal practice in the product disclosure statement (which may not be received by the consumer until after the insurance is purchased) and renewal notice.
As a result of ASIC’s review, the six insurers that perform automatic annual renewals have agreed to clearly inform consumers about automatic renewal when consumers first purchase their car insurance. Insurers who have not already done so will update their telephone sales scripts, along with clearer and more prominent messaging on their websites.
ASIC Deputy Chair Peter Kell welcomed these improvements. ‘Automatic renewal of insurance may be convenient for some consumers but it is important that this is an informed choice. Other consumers may wish to take the opportunity to shop around when their insurance is due for renewal, to ensure they are obtaining the best value cover that meets their needs. These disclosure improvements will help reduce the risk of consumers being caught by surprise by an automatic renewal.’
‘Although ASIC’s review of annual automatic renewals targeted car insurance, we encourage similar point of sale improvements in relation to other types of insurance as well, and will continue to monitor this issue.’