- The ASIC has launched court proceedings against IAG in the Federal Court following the insurer’s alleged failure to honour discount promises to customers.
- According to the ASIC, IAL (a subsidiary of IAG) employed an algorithm to increase the gross insurance premiums of products to ensure the discounts would not fall below a certain level.
- The alleged malpractice is said to have negatively impacted 596,000 customers.
The Australian Securities and Investments Commission (ASIC) on Friday announced that it has launched court proceedings against Insurance Australia Group Ltd (ASX:IAG) in the NSW Federal Court over the insurer’ alleged failure to honour discount promises to customers.
IAG, one of the country’s largest insurers, has been sued for “misleading” around 600,000 home and car insurance customers after they weren't given discounts as promised on home and car insurance between 2014 and 2019.
According to the corporate watchdog, IAG’s subsidiary IAL allegedly employed an algorithm to increase the gross insurance premiums of products to ensure the discounts would not fall below a certain level.
The alleged malpractice led to AU$60 million in discounts not being passed on to customers. ASIC said that it negatively impacted affected 596,000 customers, 705,000 separate insurance policies and took place 1,785,000 times.
“ASIC is calling on general insurers, including IAL, to ensure customers get the full discounts they are promised. This follows industry-wide failures that have led to insurers repaying more than $400 million to over 2 million home, car and other insurance customers since 2018,” said ASIC Deputy Chair Sarah Court.
“This may require insurers to update legacy IT systems and make improvements across compliance, governance and culture,” noted Court.
The ASIC has also asked all general insurers to review their pricing systems and controls to prevent consumer harm as a matter of priority.
The latest action by the corporate watchdog comes after a slew of reports since 2018 shining a spotlight on various major insurance companies including IAG over discounts and self-compliance.
Meanwhile, IAG has already committed to paying back AU$377 million to customers under various brands including NRMA.
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