Insurance Australia Group (IAG) faces legal action from corporate regulator ASIC over claims it failed to honour discount promises made to nearly 600,000 customers of its NRMA Insurance.
ASIC claims NRMA said some customers were eligible for discounts if they renewed car and home insurance policies with the insurer, but those discounts were not passed on.
In a statement released on Friday morning, ASIC alleged that a subsidiary of IAG, Insurance Australia Limited (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 said in background with the statement that “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.”
ASIC claimed in the statement that; “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.
In the statement on Friday morning, 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.”
She said ‘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 also called on all general insurers to review their pricing systems and controls to prevent consumer harm as a matter of priority.
She said insurers who do not take these actions run the risk of further enforcement action.