The nation’s corporate watchdog is calling on all general insurers to ditch unnecessary pricing complexity after a report revealed they will be forced to repay $815 million to almost 6 million consumers.
In a report released by the Australian Securities and Investments Commission (ASIC), the agency noted more than 6.5 million insurance policies had been impacted by pricing failures uncovered between January 2018 and October 2021.
According to the findings, Insurance Australia Group (ASX: IAG), which is behind brands like NRMA, GCU, Coles Insurance, IAL and SGIC, has accumulated a remediation bill of around $447.2 million.
Other companies noted by the watchdog include RACQ Insurance, which has racked up a debt of $220 million, in addition to QBE Insurance ($90.4 million), AAI Limited (19.6 million), Allianz Australia General Insurance Limited ($13.2 million), amongst others.
The findings come after ASIC commenced civil proceedings against Insurance Australia Limited in 2021, and RACQ Insurance Limited in 2023 for allegedly failing to honour pricing promises or misleading customers.
“ASIC’s report reveals three main causes for the systemic pricing failures. First, unnecessary complexity in pricing promises and pricing practices—accounting for the lion’s share (at least $379 million) of the remediation,” ASIC deputy chair Karen Chester said.
“Second, persistent underinvestment in systems, controls and data.
“Third, and perhaps the most disappointing, insurers’ inaction despite being on notice for years about these pricing risks.”
In late 2021, ASIC called on all general insurers to undertake a review of their pricing systems and controls as a matter of priority after noticing a ‘significant increase’ in pricing-related breach reports.
The watchdog wrote to 11 general insurers at the time, which collectively represented around 68 per cent of the general insurance market in Australia, directing them to complete the review.
ASIC also put general insurers on notice of these risks with a public announcement in 2013, the publication of a report in 2015 and another public reminder in 2017.
"It is beyond disappointing that despite past ASIC warnings and action, it took our further direction in late 2021 for general insurers to comprehensively find, fix and repay their customers for these broken promises,” Chester said.
“Earlier action by insurers would have avoided much of the consumer harm we now see, with $815 million in remediation.
"It’s now up to the boards of general insurers to ensure the prompt and full repayment of the $815 million owed to their 5.6 million customers, implement the fixes needed and rebuild consumer trust.”
ASIC has also commenced other investigations into general insurers involving suspected failures to deliver on price discounts promised.
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