Major insurer taken to court for failing to honour discounts

Australia’s corporate regulator is taking one of the country’s biggest insurance companies to court over unpaid insurance discounts.

On Friday morning, the Australian Securities and Investments Commission (ASIC) announced that it was taking Insurance Australia Limited (IAL) to the Federal Court for the conduct of one of its biggest insurance brands, NRMA.

ASIC alleges that NRMA customers were not given discounts as promised on home and car insurance between March 2014 and November 2019.

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According to the action, ASIC alleges that NRMA told customers that they would be eligible for certain discounts on renewal of their home and motor insurance policies and then failed to apply those discounts.

ASIC claims 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, so that the full discounts were not passed on.

The practice affected 596,000 customers across 705,000 separate insurance policies, approximately 1,785,000 times with the affected customers missing out on promised discounts totalling around $60 million, explained ASIC deputy chair Sarah Court.

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“ASIC is calling on general insurers, including IAL, to ensure customers get the full discounts they are promised,” Ms Court said. “This follows industry-wide failures that have led to insurers repaying more than $400 million to over two 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.

“This may require insurers to update legacy IT systems and make improvements across compliance, governance and culture,” she said.

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“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.”

Since January 2018, general insurers have reported a significant number of potential breaches to ASIC and remediated thousands of customers in relation to failures to honour price discounts promised to customers.

Insurance Australia Group (IAG), of which IAL is a subsidiary, is already undertaking a program to repay approximately $377 million to affected customer through brands including NRMA, CGU, RACV, SGIO and Coles Insurance.

Other insurers starting to offer remediation for failing to honour price discounts include:

  • AAI Limited (brands include GIO, AAMI, Apia and Shannons) has repaid $8 million to customers
  • QBE Insurance is repaying approximately $15 million to customers
  • Allianz has repaid over $600,000 to customers.

Are you insured with NRMA? Have you received any repayments from your insurer over discounts that were not fully honoured? How much money did you get back? Should more be done to penalise insurers for doing the wrong thing? Why not share your thoughts in the comments section below?

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Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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