Insurers who offer no-claims discounts to clients are being encouraged to provide their customers with a meaningful understanding of what is being offered, by the Australian Securities and Investments Commission (ASIC).
A report by the regulator found that "while the disclosure of key elements of an NCD scheme varied considerably between brands, there was room for improvement across the board so that consumers can make fully informed decisions about purchasing or renewing a particular insurance policy or about making a claim."
ASIC said many no-claims discount schemes created an impression that claims history was separated from other factors that determine the price of an insurance policy.
However, the regulator said it "found that this was not the case in practice, and consumers may not understand the full impact a claim may have on their premium".
"For example:
- making a not-at-fault claim can have an effect on the underlying premium even where there is no effect on the NCD rating; and
- making an at-fault claim can have an effect on the underlying premium in addition to the NCD rating."
The ASIC report said some clients were unable to realise full discounts with insurers applying minimum premiums, which have the potential to undermine and limit the full no-claims discount entitlement.
"It found that the existence and application of minimum premiums is generally poorly disclosed," ASIC said.
While stressing that no-claims discounts were not unlawful, ASIC deputy chairman, Peter Kell, called on insurers to provide their clients with a clearer picture of what the scheme entailed.
"ASIC's report makes it clear that insurers who choose to retain such schemes in the future should implement measures that will meaningfully improve consumers' understanding of these schemes," he said.
"The measures should also help ensure consumers make an informed decision about purchasing or renewing a particular insurance policy or about making a claim."
