Australian Federal Court has imposed a A$40m ($26.61m) fine on Insurance Australia Group (IAG) subsidiary Insurance Australia Limited (IAL) over pricing discount failures.
According to the Australian Securities and Investments Commission (ASIC), the Court found that between March 2014 and September 2019, the insurer made false or misleading promises to more than 600,000 customers.
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During the time of renewal of NRMA-branded motor, home, boat, and caravan insurance policies, IAL did not provide clients with the full amount of loyalty and no claims bonus savings that it had promised, the country’s corporate regulator added.
ASIC deputy chair Sarah Court said: “IAL used a specific pricing algorithm that limited the discounts renewing customers could receive, ensuring their premiums did not fall below a certain price point.
“This pricing method meant promised discounts were not passed on and customers paid more in premiums than they had been promised.”
This fine is the largest ever by the court against an insurer for violating consumer protection regulations on financial services in Australia.
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By GlobalDataIn a statement, IAG said it “acknowledges the Federal Court of Australia’s decision” to impose a civil penalty and costs on IAL “for contraventions of the ASIC Act and Corporations Act”.
The subsidiary added: “IAG has apologised for this failure, recognised its significance and that this was unacceptable. Refunds have been issued to all customers impacted by this failure.”
Last month, ASIC released a report calling on general insurance companies to simplify their pricing process.
The regulator also noted that more than 5.6 million customers were overcharged by A$815m ($544.18m) as a result of insurers’ inability to uphold their price commitments.
