ASIC has commenced court proceedings alleging QBE Insurance (Australia) Limited (QBE) misled customers about the value of discounts offered on certain general insurance products.
Between July 2017 and September 2022, QBE made statements and sent renewal notices promising discounts on premiums for a range of general insurance products, including home, contents and car insurance.
ASIC Deputy Chair Sarah Court said, ‘ASIC alleges QBE’s pricing model potentially eroded the discounts received by over half a million customers, in some cases to nil.
‘Some customers were promised discounts for their loyalty when renewing their policies, which they didn't receive.
‘The failure by insurers to deliver on pricing promises is a key priority for ASIC and we will continue to take action to hold insurers to account. Where insurers make discount promises to renewing customers, they need to have robust systems and controls in place to make sure their customers receive the discounts they were promised.’
The discounts were offered through more than 500,000 renewal notices to retirees, loyalty customers, QBE shareholders, those holding multiple QBE policies, and those holding QBE policies and who had made no claims.
Statements offering pricing discounts were also made in various product disclosure statements published on QBE’s website.
The court proceedings have been filed in the Federal Court. ASIC is seeking civil penalties, declarations and adverse publicity orders.
Today’s announcement follows ASIC’s action against IAG-subsidiaries, Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia Pty Limited (IMA) in August 2023 (23-228MR), alleging IAL and IMA misled customers about the loyalty discounts available for certain types of home insurance.
ASIC also brought action against IAL (21-270MR) in October 2021 alleging it misled customers regarding loyalty discounts available for certain types of home insurance including NRMA branded insurance, resulting in IAL being penalised $40 million over pricing discount failures in June 2023 (23-179MR). Separately, ASIC also initiated proceedings against RACQ for pricing discount failures resulting in a $10 million penalty (23-323MR).
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Background
QBE Insurance (Australia) Limited is a member of the QBE Insurance Group of companies (ASX: QBE), which is Australia’s largest insurers and reinsurers, and one of the largest insurers and reinsurers in the world.
ASIC alleges that QBE’s pricing mechanism involved:
- imposing a minimum premium to ensure it was at or above the lowest retail premium QBE was prepared to accept from a customer to insure a particular risk; and/or
- using a pricing algorithm at the renewal of the insurance policy to limit the extent of any reduction (in percentage terms) in the premium compared to the expiring premium.
These pricing mechanisms meant the final price of a customer’s insurance premium may not have included the full value of the discount(s) promised by QBE. ASIC alleges QBE did not disclose to customers during the relevant period the existence minimum premiums or the price reduction limits imposed by the pricing algorithm.
ASIC alleges QBE made false or misleading representations regarding the value, benefit, price and the existence or effect of a right of its general insurance products, and misled the public as to the nature, characteristics and suitability of its insurance products. As a result, QBE may have breached sections 12DB(1)(a), (e), (g), (i), and/or 12DF(1) of the ASIC Act.
QBE self-reported the failures to ASIC in October 2022.
In June 2023, ASIC released Report 765 When the price is not right: Making good on insurance pricing promises. The report outlines a range of pricing failures identified by general insurers after an ASIC-initiated review of pricing practices. It sets out the standards general insurers need to meet in designing and promoting pricing promises to ensure customers get the full benefit of any discounts promised. As a result of ASIC’s work, general insurers were, at the time the report was issued, remediating over $815 million to more than 5.6 million customers for pricing failures reported to ASIC since 1 January 2018.
ASIC’s Moneysmart website features information that supports Australian customers in making decisions about insurance. It’s important to compare policies from different insurers and to shop around for the best value for money. Find out more about choosing car insurance and home insurance.