Millions of Australians have been overcharged for insurance and are due more than $800 million in repayments after the corporate watchdog uncovered a raft of dodgy pricing at big companies.
A report published by the Australian Securities and Investments Commission on Friday ran the ruler over pricing failures in more than 6.5 million policies offered by the insurance industry.
The companies at fault include Insurance Australia, the RAC Group, AAMI, Suncorp, and more than a dozen other smaller operators.
ASIC found customers were not being offered promised discounts in full, that advertising for policies contained inaccurate information, and that there were errors in systems that determine prices.
Basically, customers were being ripped off and the insurance companies have taken far too long to fix the problem.
There has been about $815 million in overcharging across the industry that insurers must repay, ASIC said.
“It is beyond disappointing that despite past ASIC warnings and action, it took our further direction in late 2021 for general insurers to comprehensively find, fix and repay their customers for these broken promises,” ASIC chair Karen Chester said on Friday.
“Earlier action by insurers would have avoided much of the consumer harm we now see, with $815 million in remediation.
“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.”
Have you paid too much?
The insurers exposed by ASIC cover the majority of Australia’s general insurance market, so chances are you’ve overpaid – particularly if you bought a policy that came with a discount.
But to know for sure, review the below table which surmises the dodgy behaviour ASIC identified.
The bulk of the overcharging was done across Insurance Australia Group, which runs insurance policies for NRMA, CGU, Coles, IAL, LSV, SGIO, SGIC, Swann and WFI.
All told, $447.2 million in overcharging was uncovered across more than 4.2 million policies.
The next worst offender was RACQ Insurance – whose brands include RACQ, Carpeesh, Famous, Honey, Hug, and RACWA – where $220 million in overcharging was discovered.
From there, the numbers fall drastically, with QBE insurance – QBE, Chu, MBInsurance and Victor – overcharging on about 746,000 policies by $90.4 million, ASIC’s report reveals.
ASIC said insurers are expected to remediate customers, so policyholders shouldn’t need to take any action, with civil proceedings currently underway against the worst policy offenders.
“We have already commenced related civil penalty proceedings against two insurers, in 2021 and 2023, and we have further investigations underway,” Ms Chester said on Friday.
Dodgy discounts
ASIC put a good deal of the pricing failures down to poor governance, systems and risk control.
About $379 million in overcharges were caused by the use of practices like price floors, which ASIC said led to many customers failing to receive discounts on policies they were promised.
ASIC uncovered 2000 pricing promises from insurers in its investigation from 2018 to 2023.
It found “little consistency” in fulfilling these promises, including cases where cash back deals or promotions that offered gift cards were incorrectly applied – shortchanging policy holders.
Elsewhere, inaccurate descriptions of what discounts customers could receive on their policies in marketing materials led to about $242 million in overcharges, while $76 million was caused simply by insurers improperly applying eligibility criteria for those discounted premiums.
“General insurers should use clear and concise language in promotional materials, so that consumers clearly understand the nature of the promise and the eligibility criteria,” ASIC said.
“Consumers should not be required to prove their eligibility for a pricing promise where insurers already hold the required information.”
