The Australian Securities and Investments Commission (ASIC) has sued two subsidiaries of Insurance Australia Group (IAG), alleging they misled customers about the loyalty discounts available for specific home insurance.
The corporate regulator initiated civil penalty proceedings in the federal court against Insurance Australia (IAL) and Insurance Manufacturers of Australia (IMA).
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The policies involved in the lawsuit comprise the SGIO, SGIC and RACV home insurance products.
Loyal clients may have raised their premiums before applying the promised discounts, ASIC alleged.
ASIC deputy chair Sarah Court said: “The way they operated their pricing algorithm meant that some longer-term or more loyal customers were allocated, or may have been allocated, higher premiums before the promised discounts were applied.
“There is a risk that loyal customers, having been promised a discount, were persuaded to stay with these companies, and in doing so lost their opportunity to shop around for a better price.”
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By GlobalDataIn a press release, IAG acknowledged the commencement of the ASIC lawsuit and will “defend the proceedings”.
IAG also added that its subsidiaries uphold delivering on promises made to customers on loyalty discounts and do not agree with ASIC allegations of misleading clients.
IAG recently posted a 140% increase in profit attributable to shareholders of A$832m ($533m) for FY23.
