ASIC takes insurance giant to task over allegedly failing to apply $60m in promised discounts

ASIC takes insurance giant to task over allegedly failing to apply $60m in promised discounts

Australia’s corporate watchdog has Insurance Australia Limited (IAL) in its sights over the company’s alleged failures to honour around $60 million in promised discounts to customers, with proceedings launched in the Federal Court today.

The Australian Securities and Investment Commission (ASIC) alleges IAL, wholly-owned by Insurance Australia Group (ASX: IAG), engaged in misleading or deceptive conduct to some NRMA Insurance customers by stating they were eligible for certain discounts and then failing to apply those deals.

ASIC claims IAL increased the gross insurance premiums that would apply to those customers to ensure their net premiums after the discounts did not fall below a certain level. As a result, the full discounts were allegedly not passed on to customers.

In total, ASIC believes these alleged practices affected at least 569,000 customers in respect of 705,000 separate insurance policies approximately 1.79 million times.

As such, the affected customers allegedly did not receive promised discounts totalling around $60 million.

“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,” ASIC deputy chair Sarah Court said.

“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.”

In response, IAG said it acknowledged the proceedings, noting it identified the issue as part of a review in 2019 and had remediated more than 80 per cent of affected NRMA Insurance customers.

“IAG reviewed its pricing commitments and promises across its products, and identified impacted customers to provide refunds. IAG is working closely with ASIC through the remediation program,” IAG said.

“The customer refunds associated with these proceedings are covered by the customer refund provision that was established in FY20 and FY21, which also covers other products and pricing-related matters, but does not include any potential civil penalty outcome.

“IAG apologises for this failure, recognises the significance and that this was unacceptable, and is putting this right for its customers as soon as possible.”

Shares in IAG are down 2.95 per cent to $4.93 per share at 12.03pm AEDT.

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