IAG Faces Second Class Action Lawsuit Over ‘Loyalty Tax’ Practices

December 10, 2024 12:15 PM AEDT | By Team Kalkine Media
 IAG Faces Second Class Action Lawsuit Over ‘Loyalty Tax’ Practices
Image source: shutterstock

Highlights

  • Second lawsuit: Law firm Slater and Gordon files class action against IAG over alleged "loyalty tax" practices.
  • Pricing algorithm accusations: IAG's subsidiary is accused of using a pricing algorithm to unfairly increase premiums for customers unlikely to switch insurers.
  • Shares down: IAG shares fell by nearly 1% to AU$8.61, but remain near five-year highs.

Insurance Australia Group Ltd (ASX:IAG) shares are under pressure on Tuesday following the announcement of a second class action lawsuit this year. The latest legal challenge, filed by Slater and Gordon with the Victorian Supreme Court, accuses IAG's subsidiary, Insurance Australia Limited (IAL), of misleading and deceptive conduct regarding its alleged “loyalty tax” practices.

This follows a previous class action launched earlier in 2024, also by Slater and Gordon, which targeted similar concerns over IAG’s pricing practices.

Class Action Details

The new lawsuit alleges that IAL used a pricing algorithm to identify customers who were less likely to switch insurers and then raised their premiums accordingly. Slater and Gordon claims these customers were misled into thinking they were receiving loyalty discounts when, in reality, their premiums were inflated by a "loyalty tax".

According to Ben Hardwick, practice group leader at Slater and Gordon, millions of Australians may have been impacted by these practices, which, if proven, would have caused customers to unknowingly pay higher premiums. He stated, "Consumers are demanding compensation for the loss and damages they have suffered as a result of IAL’s conduct."

Legal Precedent and IAG’s Response

This is not the first time IAG has faced legal action for its pricing practices. Earlier in the year, Slater and Gordon filed another class action over similar accusations, involving both IAL and another IAG subsidiary, Insurance Manufacturers of Australia (IMA). That action focused on premium increases for customers of insurers RACV, SGIO, and SGIC.

IAG has not yet publicly responded to this latest lawsuit, but in May 2024, the company stated it would defend the original class action.

Market Impact

Following the announcement, IAG shares fell by nearly 1% to AU$8.61. Despite the drop, the stock remains close to its five-year highs, reflecting investor confidence in the company’s broader financial performance.

 


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