ASIC has launched civil penalty proceedings in the Federal Court against Insurance Australia Limited (IAL) following IAL’s failure to honour discount promises made to its customers.
ASIC alleges that IAL engaged in misleading or deceptive conduct and made false or misleading representations to some NRMA Insurance customers by stating that customers were eligible for certain discounts on renewal of their home and motor insurance policies and then failing to apply those discounts.
ASIC claims IAL increased the gross insurance premiums that would apply to those customers to ensure that their net premiums after the discounts did not fall below a certain level. As a result, the full discounts were not passed on to customers.
ASIC alleges that this practice impacted NRMA Insurance renewals between March 2014 and November 2019 and affected at least 596,000 customers, in respect of 705,000 separate insurance policies, approximately 1,785,000 times. The affected customers did not receive promised discounts totalling around $60 million.
ASIC Deputy Chair Sarah Court said, ‘ASIC is calling on general insurers, including IAL, to ensure customers get the full discounts they are promised. This follows industry-wide failures that have led to insurers repaying more than $400 million to over 2 million home, car and other insurance customers since 2018. All insurers should take urgent steps to ensure they can and do meet the pricing promises they make.
‘This may require insurers to update legacy IT systems and make improvements across compliance, governance and culture. Where there are failures, or empty promises about price discounts, ASIC will use the full range of regulatory tools available to protect consumers - including enforcement action,’ concluded Ms Court.
Ms Court called on all general insurers to review their pricing systems and controls to prevent consumer harm as a matter of priority. In particular, general insurers should:
- identify any differences between the prices (including discounts) they promised their customers (over at least the past five years) and what those customers were charged;
- comply with their breach reporting obligations;
- remediate any customers impacted, including refunding overpaid premiums; and
- fix the systems, processes, controls and governance practices that have led to promised discounts not being honoured.
Insurers who do not take these actions run the risk of further enforcement action.
Download
Background
Since 1 January 2018, general insurers have reported a significant number of breaches or potential breaches to ASIC and remediated thousands of customers in relation to failures to honour price discounts promised to customers. In relation to those reported breaches:
- Insurance Australia Group (IAL & Insurance Manufacturers of Australia Pty Limited (IMA)) is undertaking a programme to remediate approximately $377 million to customers. IAL and IMA issue insurance through brands including NRMA Insurance, CGU, RACV, SGIO, SGIC and Coles Insurance.
- AAI Limited has remediated over $8 million to customers. AAI is part of the Suncorp Group and issues insurance through brands including GIO, AAMI, Apia and Shannons.
- QBE Insurance (Australia) Limited (QBE) is remediating approximately $15 million to customers.
- Allianz Australia Insurance Limited has remediated over $600,000 to customers.
- Westpac General Insurance Limited (now Allianz Australia General Insurance Limited) has remediated approximately $13 million to customers. From 1 July 2021, this company is part of the Allianz Group.
- Commonwealth Insurance Limited (CIL) has remediated approximately $590,000 to customers.
- RACQ Insurance Limited is remediating over $3.4 million to customers.
- The Hollard Insurance Company Pty Ltd has remediated approximately $105,000 to customers.
Editor's note:
A case management hearing has been listed before Justice Abraham for 29 November 2021.
Editor's note 2:
On 23 November 2021, the case management hearing listed for 29 November 2021 was vacated, and the Court instead made timetabling orders on the papers with the consent of the parties.
The matter has been listed for a case management hearing on 2 March 2022.
Editor's note 3:
The case management hearing scheduled for 2 March 2022 was vacated. The next case management hearing has yet to be set.
Editor's note 4:
The next case management hearing has been set for 18 May 2022.
Editor's note 5:
The case management hearing for 18 May 2022 was adjourned until 30 May 2022.
Editor's note 6:
The case management hearing for 30 May 2022 was vacated. The next case management hearing has yet to be listed by the Court.
Editor's note 7:
A case management hearing has been listed for 5 September 2022.
Editor's note 8:
On 5 September 2022, the matter was adjourned until 25 October 2022. The matter has also been listed for hearing on 3 April 2023 for an estimated 2 days.
Editor's note 9:
On 20 October 2022, a case management hearing for 25 October 2022 was vacated. The matter remains listed for a hearing date on 3 April 2023 for an estimated two days.
Editor's note 10:
The hearing has been adjourned until 11 May 2023.
Editor's note 11:
The matter was heard on 11 May, judgment has been reserved.