- General insurance providers will return an estimated $815 million to 5.6 million customers, according to new ASIC findings
- The regulator has considered reports of pricing failures received over the past five years
- Its latest report implicates brands such as NRMA, RACQ, AAMI, and Allianz
- The lion’s share of the pricing failures was said to have stemmed from complicated promises and practices
Millions of Australian insurance customers have been left out of pocket on “broken promises” of discounts and benefits, according to Australian Security and Investments Commission (ASIC) deputy chair Karen Chester.
“This systemic failure by insurers to deliver on their pricing promises has seen more than 5.6 million consumers overcharged $815 million for their insurance,” she said.
It considered reports of pricing failures received by ASIC since 2018, implicating 11 participating general insurers behind 50 brands.
They include many household insurance names, such as NRMA, RACQ, AAMI, Allianz, and Suncorp.
At least $379 million of failures stemmed from “unnecessary complexity in pricing promises and pricing practices” Ms Chester said.
“[This includes] Persistent underinvestment in systems, controls and data ... and perhaps the most disappointing, insurers’ inaction despite being on notice for years about these pricing risks,” she said.
The report also found general insurers didn’t have the needed product governance, systems, data, and controls in place to deliver on their promises.
On top of that, insurers didn’t always have enough oversight and control over the pricing promises made or delivered by those distributing their products.
Not insurers’ first warning
The watchdog kicked off civil penalty proceedings against Insurance Australia Group in 2021 and RACQ Insurance in 2023. It alleged the companies failed to honour pricing promises, and misled customers.
ASIC also demanded 11 general insurers ‘find, fix, report, and repay’ pricing failures in 2021 on the back of an increase in reported breaches of promises.
That saw 2,000 price promises across more than 500 general insurance products and 50 brands reviewed.
“Earlier action by insurers would have avoided much of the consumer harm we now see,” Ms Chester said.
“It’s now up to the boards of general insurers to ensure the prompt and full repayment of the $815 million owed to their 5.6 million customers, implement the fixes needed and rebuild consumer trust.”