IAG Faces New Allegations Amid Loyalty Pricing Scandal

2

The class action primarily concerns renewals under the RACV, SGIO, and SGIC brands—already subjects of a Federal Court case initiated by the Australian Securities and Investments Commission (ASIC), which IAG is also disputing.

Slater and Gordon indicate that over 1 million policyholders renewed their insurance with these brands during the six-year period under scrutiny. The firm believes the class action might result in financial compensation reaching millions of dollars.

The allegation from the law firm centers around claims that IAG engaged in deceptive and unconscionable practices. Customers were purportedly led to believe they were receiving loyalty discounts, while they may have been paying inflated base premiums, effectively nullifying the promised reductions.

According to Ben Hardwick, the leader of the class actions practice at Slater and Gordon, a sophisticated pricing algorithm used by IAG determined customers' likelihood of switching insurers. Those likely to stay with their existing insurer were allegedly subjected to higher premium increases.

"Loyal customers believed they were benefitting from discounts when, in reality, their base premiums were increased before any discount was applied," Hardwick explained. "Given that home and contents insurance is a significant expense for many Australians, the notion that loyal customers were possibly exploited in this manner is particularly troubling."

IAG, for its part, denies these allegations. The company stated that its subsidiaries, Insurance Australia Ltd (IAL) and Insurance Manufacturers of Australia (IMA), have delivered on all loyalty discount promises and maintained that they did not mislead customers about the scope of these discounts.

"Both IAL and IMA will vigorously defend the claims brought forth by Slater and Gordon," the company declared.

The contested policies, provided by RACV, SGIO, and SGIC, covered customers in Victoria, Western Australia, and South Australia, respectively. In addition, Slater and Gordon are investigating similar issues with NRMA Insurance, which operates in every state except Victoria.

ASIC's Federal Court case targets policies issued under the SGIO and SGIC brands between August 2017 and January 2023, and RACV policies from August 2017 to August 2023. A case management hearing is set for October 3.

Last year, ASIC identified misleading pricing promises in the insurance sector as an enforcement priority after discovering that many companies lacked adequate systems to ensure they honored their commitments to customers.

In June of the previous year, the Federal Court fined IAG $40 million for failing to uphold discount promises for NRMA-branded policies. Such policies included motor, home, boat, and caravan insurance, and involved a price "cupping mechanism."

Additionally, the court fined RACQ $10 million in November for potentially misleading disclosures regarding available discounts in certain product statements.

According to an ASIC report from June last year, insurers were expected to remit over $815 million to more than 5.6 million consumers stemming from pricing failures identified and reported since January 2018. This involved over 6.5 million policies.

Published:Monday, 3rd Jun 2024
Source: Paige Estritori

Share this news item:

Insurance News

Clear

Impact of Trump Tariffs on Global Insurance Industry 11 Jul 2025: Paige Estritori According to Swiss Re’s latest Sigma report, the growth of property and casualty premiums is moderating in both Australia and globally. This moderation is primarily driven by a slowdown in rate hikes. Additionally, the Trump administration's America First trade policy is putting further pressure on the insurance sector. - read more

Navigating Changes in Australia's Life Insurance Advice Landscape 10 Jul 2025: Paige Estritori The conversation on the shifting dynamics in Australia's life insurance advice sector featured Zurich Australia's head of adviser channel, Kieran Forde, and Hayes & Co director, Katherine Hayes. They engaged with editor Chris Dastoor to spotlight the current market conditions and future prospects for financial advisers in this domain. - read more

ASIC Challenges Federal Court's 'Fair Term' Ruling 09 Jul 2025: Paige Estritori The Australian Securities and Investments Commission (ASIC) is appealing a Federal Court decision regarding the wording of a 'pre-existing condition' clause in certain HCF Life insurance products. The court previously determined that while the wording had the potential to mislead consumers, it did not constitute an unfair contract term under the current laws set out in the ASIC Act 2001. - read more

ICA Advocates for Strata Law Reform in the ACT to Enhance Building Management 08 Jul 2025: Paige Estritori The Insurance Council of Australia (ICA) is urging the Australian Capital Territory (ACT) to adopt strata transparency regulations, aiming to enhance oversight of building repairs and maintenance by owners’ committees. This call was made during a parliamentary inquiry, where the ICA pushed for measures akin to recent legislative changes in New South Wales. - read more

Tasmanian Government Insurance Proposal Faces Industry Backlash 07 Jul 2025: Paige Estritori The Tasmanian government's recent proposal to establish a state-run insurance entity has drawn significant criticism from key players in the insurance industry. The plan, spearheaded by Premier Jeremy Rockliff, aims to expand the Motor Accidents Insurance Board into a broader service named TasInsure, offering products including home and contents insurance, small business coverage, and more. The RACT, a major player in Tasmania's insurance sector, expressed considerable concern, labelling the initiative as a simplistic answer to complex problems. - read more