General insurance companies in Australia will have to pay A$815m ($544.18m) to more than 5.6 million consumers, according to the Australian Securities and Investments Commission (ASIC).
The ASIC has released a report called ‘When the price is not right: Making good on insurance pricing promises’.
All general insurers are being urged by ASIC to simplify pricing and to make appropriate changes to their procedures, practices, and controls so they can adhere to the pricing commitments they make to their clients.
The report comes in response to ASIC’s action in October 2021, which mandated 11 general insurers to perform in-depth reviews to “find, fix, report, and repay” for pricing failures.
ASIC deputy chair Karen Chester said: “This systemic failure by insurers to deliver on their pricing promises has seen more than 5.6 million consumers overcharged $815m for their insurance.
“We have already commenced related civil penalty proceedings against two insurers, in 2021 and 2023, and we have further investigations underway.”
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The analysis reveals that general insurers lacked the necessary product governance, systems, data, and controls to fulfil their pricing promises.
Insurance companies also frequently lacked sufficient oversight and control over the pricing promises made or fulfilled by the distributors of their goods, and pricing practices were unduly complex, the ASIC said.
Chester added: “It is beyond disappointing that despite past ASIC warnings and action, it took our further direction in late 2021 for general insurers to comprehensively find, fix and repay their customers for these broken promises.
“It’s now up to the boards of general insurers to ensure the prompt and full repayment of the A$815m owed to their 5.6 million customers, implement the fixes needed and rebuild consumer trust.”