ASIC takes Insurance Australia Limited to court

ASIC takes Insurance Australia Limited to court | Insurance Business Australia

ASIC takes Insurance Australia Limited to court

UPDATED

The Australian Securities & Investments Commission (ASIC) has launched Federal Court civil penalty proceedings against Insurance Australia Limited over NRMA Insurance premiums.

The regulator is accusing Insurance Australia Limited of having engaged in misleading or deceptive conduct and making false or misleading representations to certain customers of NRMA Insurance – a trading name of Insurance Australia Limited – by supposedly saying that they were eligible for home and motor insurance renewal discounts that, according to ASIC, were not applied.

It is ASIC’s allegation that gross insurance premiums were raised so that ‘discounted’ net premiums did not fall below a certain level – essentially not passing on the full discounts to policyholders.

“ASIC alleges that this practice impacted NRMA Insurance renewals between March 2014 and November 2019 and affected at least 596,000 customers, in respect of 705,000 separate insurance policies, approximately 1,785,000 times,” stated the watchdog in a release this morning.

“The affected customers did not receive promised discounts totalling around $60 million.”

In response to the proceedings commenced by ASIC, NRMA Insurance parent company IAG said it had identified the issue – which it self-reported to the regulator – as part of a proactive review in 2019.

“IAG reviewed its pricing commitments and promises across its products, and identified impacted customers to provide refunds,” noted the insurance giant in a statement. “IAG is working closely with ASIC through the remediation programme.

“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.”

The insurer added that more than 80% of affected NRMA Insurance customers have now been compensated under the remediation programme.

“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,” the group went on to say. “Since late 2019, IAG has enhanced its systems and processes for the delivery of discounts, as part of its significantly improved risk culture and control environment.”   

Meanwhile, ASIC deputy chair Sarah Court called on all general insurers to review their pricing systems and controls, including ensuring that customers get the discounts they are promised in full.

“All insurers should take urgent steps to ensure they can and do meet the pricing promises they make,” said Court. “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.”