RACQ Insurance has been issued with a $10 million fine by the Federal Court for potentially misleading customers about price discounts for certain types of insurance cover.
The case was brought about after an investigation by the Australian Securities and Investments Commission (ASIC) found RACQ had failed to inform customers of policy discounts available to them by neglecting to put them in their Product Disclosure Statements (PDSs).
The court found that RACQ sent out the misleading PDSs on at least five million occasions between March 2017 and March 2022. Approximately 458,746 customers missed out on $86,476,339 in discounts.
RACQ admitted to the breaches, and agreed that the penalty was appropriate. They were also ordered to pay ASIC’s court costs.
Need for transparency
Sara Court, deputy chair at ASIC, says businesses have a legal obligation to be transparent with customers.
“Consumers need to be able to rely on the pricing promises made to them by insurers, and insurers need to make sure that they pass on those promises in full,” she said.
“ASIC identified pricing promises in insurance as an enforcement priority this year, and will continue to monitor marketing and pricing practices in the industry, and use the full range of regulatory tools available to protect consumers from general insurers failing to honour promised discounts.”
The court found RACQ’s motor, home, caravan and trailer and unique vehicle insurance policy PDSs included statements that certain discounts would be applied to customers’ insurance premiums.
These were found to be potentially misleading because in reality, the discounts were only applied by RACQ to the base insurance premium, and not to any additional premiums paid for certain optional extras the customer may have chosen.
The optional extras in question were: excess free windscreen, hire car, no claim discount protection, increased caravan contents, pet, mobile phone, small business contents and items away from home.
Ms Court said she was pleased with the outcome of the case, and praised the speed at which it was conducted.
“ASIC brought this case in February 2023,” she said.
“We are pleased it has reached a conclusion within a year, with a significant penalty handed down and a clear message to the insurance industry that failures in pricing practices will not be tolerated.”
RACQ is a wholly owned subsidiary of The Royal Automobile Club of Queensland, a community organisation owned by its nearly 1.8 million members.
Do you have a policy with RACQ? Do you think this ruling is fair? Let us know in the comments section below.
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