ASIC has announced that it has issued civil penalty proceedings in the Federal Court against Insurance Australia Limited (IAL) following IAL’s failure to honour discount promises made to its customers.

ASIC alleges that

• IAL engaged in misleading or deceptive conduct and made false or misleading representations to some NRMA Insurance customers by stating that customers were eligible for certain discounts on renewal of their home and motor insurance policies and then failing to apply those discounts;
• IAL represented to those customers that the premium payable by the customer on renewal of the policy included a stated percentage (and in some cases a dollar value) Loyalty Discount, and a stated percentage (and in some cases a dollar value) a no claim bonus discount, that had been applied to the premium that would otherwise have been payable by the customer had the discounts not been applied;
• 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. As a result, the full discounts were not passed on to customers.

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

ASIC says that general insurers should:

• identify any differences between the prices (including discounts) they promised their customers (over at least the past five years) and what those customers were charged;
• comply with their breach reporting obligations;
• remediate any customers impacted, including refunding overpaid premiums; and
• fix the systems, processes, controls and governance practices that have led to promised discounts not being honoured.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.