ASIC sues RACQ Insurance over pricing discount failures – Daily – Insurance News
The Australian Securities and Investments Commission (ASIC) has launched Federal Court action against RACQ Insurance over pricing discount failings as it cracks down on an industry-wide issue.
ASIC alleges that RACQ Insurance misled customers in its product disclosure statements about the discounts available for certain types of cover between February 2017 and March 2022.
The motor, home, caravan and trailer and unique vehicle policy statements indicated that discounts would be applied, but ASIC alleges it was misleading because they only applied to the base premium and not to the additional amounts paid for certain optional extras.
“We allege that RACQ misled its customers about the discounts to which they were entitled,” Deputy Chair Sarah Court said today. “The failure by insurers to deliver on pricing promises is a key priority for ASIC and we will continue to take enforcement action to hold insurers to account in this regard.”
ASIC in October 2021 also launched legal action against IAG over pricing discount promises. The matter against subsidiary Insurance Australia Ltd (IAL) is listed for the Federal Court on April 3 for an estimated two-day hearing.
The ASIC enforcement priorities program for this year includes “misleading insurance pricing promises” and the regulator says it will continue to take strong action when necessary to ensure that promises made about pricing to customers are kept.
“We consider there needs to be a general improvement in insurers’ risk and compliance management arrangements to ensure robust systems and controls are in place, enabling insurers to deliver on their pricing promises,” Ms Court said.
RACQ Insurance self-reported the pricing issues after ASIC called on insurers to review their practices in October 2021. The insurer has since completed a broader pricing promises review, has updated product disclosure statements and has been working closely with the regulator through a remediation program.
The insurer says the majority of refunds for the matter are expected to be issued by June.
“As a member-owned club, we take our responsibilities and obligations seriously and will use this opportunity to ensure our members are better served as we move forward,” it says in a statement acknowledging the ASIC action. “RACQ apologies for these errors as they are not in keeping with our high standards and values.”
RACQ says it’s been undertaking a significant investment in systems and processes that will deliver improved outcomes, stronger risk management, simplified products and easier processes.
ASIC says up to 500,000 RACQ members are expected to receive refunds for matters including the failures outlined in the court action, with the insurer reporting the total cost could reach up to $220 million.
ASIC’s other Deputy Chair Karen Chester told the House of Representatives Standing Committee on Economics last October that across the industry customer remediation over failures to deliver promised premium discounts have reached $760 million.
The regulator will deliver a report on its review of pricing practices in the insurance industry in the first half of this year.