The industry has for years had the capability to charge higher premiums for certain people renewing policies.
Four mainstream Australian insurers say they avoid deliberately inflating premiums for customers predicted to be more likely to tolerate higher price renewals, contrasting withBut a couple of insurers, including major operator Suncorp, refuse to clarify whether they use such an algorithm in their premium setting.
The model is alleged to have “had the purpose of allocating a smaller relative price increase to the policies that were predicted to be less likely to renew at higher prices; and a larger relative price increase to the policies that were predicted to be more likely to renew at higher prices”.Several insurance sources were aware of such a premium adjustment capability, saying it had been available for more than five years. One senior figure described any use of it as immoral.
QBE also said it “does not consider a renewing policyholder’s price elasticity in our pricing algorithms”. Sunshine Coast-based Youi said it did not use the approach outlined by ASIC and Brisbane-based RACQ also said it did “not have an algorithm built into its pricing engine that predicts the likelihood of an individual member renewing nor is the price adjusted on that basis”.
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