Slater and Gordon is investigating a possible class action against two prominent insurance companies, claiming policyholders may have been misled.
The legal giant says customers promised loyalty discounts did not know of an underlying ‘loyalty tax’. The tax basically reverses the discount. Evidence of the practice is publicly available, says Slater and Gordon.
Should the action proceed and be successful, it could be damaging to the brands of the companies involved: Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia Pty Limited (IMA). The companies come under the umbrella of Insurance Australia Group. Though it’s one of Australia’s biggest insurance companies, it’s not a household name, and neither are IAL and IMA.
But the brands involved in Slater and Gordon’s action are well known – especially in their home states: RACV, SGIO and SGIC. The damage done by revelations of a stealthily inserted loyalty tax could be considerable.
In a media release, Slater and Gordon made it clear that the matter is at an investigative stage. The statement refers to “potential class actions”.
The loyalty discount giveth and the loyalty tax taketh away
Brand loyalty is an important feature of the retail world, for buyers and sellers alike. Customers like the idea of rewards from the retailers or businesses they return to regularly. Likewise, retailers with loyal customers have a guaranteed income stream. And that grows if a loyal customer recommends the business to others.
It’s a win-win relationship that one would think a business or retailer would not want to endanger. However, if Slater and Gordon’s investigations result in a class action, the relationships between the RACV, SGIO and SCIC and many of their customers could be severely damaged.
In situations such as these, it’s not price that would damage or destroy many customers’ loyalty, but perceived deliberate deceit.
Slater and Gordon has not yet initiated a class action, but is investigating the possibility. Nevertheless, the company says the publicly available information indicates policyholders offered loyalty discounts knew nothing of an offset.
The offset mechanism was a ‘loyalty tax’ that the insurers built into the base premium without policyholders’ knowledge.
Slater and Gordon’s view
Slater and Gordon’s Henry Hamilton-Lindsay said the loyalty tax targeted those least likely to change insurers. Mr Hamilton-Lindsay is a class actions associate with the firm. The insurers “used an algorithm to determine who was most likely to renew their policy”, he said. They then “took steps to increase those customers’ base premiums, despite them often being long-term customers”.
Mr Hamilton-Lindsay is concerned it could be a widespread practice.
“We believe there may be hundreds of thousands of Australians who thought they were receiving discounts by remaining loyal. In reality [they] were being charged hundreds of dollars more each year as a result of that loyalty,” he said.
“We believe that money belongs in the pockets of everyday Australians, particularly given the rising cost of living.”
Slater and Gordon is no stranger to the world of class actions. It previously brought consumer credit insurance class actions against Australia’s ‘big four’ banks. Those actions resulted in a $176 million settlement.
Customers potentially affected by the insurance companies’ practices can register directly with Slater and Gordon.
Do you keep a close eye on your insurance premiums? Have you noticed any sneaky pricing tactics? Let us know via the comments section below.
Also read: Calls for reform over funeral insurance ‘rort’