ASIC has commenced civil penalty proceedings in the Federal Court alleging RACQ Insurance Limited (RACQ) misled customers in its product disclosure statements about the pricing discounts available for certain types of insurance cover.
Between February 2017 and March 2022, ASIC alleges product disclosure statements for RACQ’s Motor, Home, Caravan & Trailer and Unique Vehicle insurance policies included statements that certain discounts would be applied to customers’ insurance premiums.
ASIC alleges that these statements were misleading because the discounts were only applied by RACQ to the base insurance premium, and not to additional premiums paid for certain optional extras.
ASIC Deputy Chair Sarah Court said, ‘We allege that RACQ misled its customers about the discounts to which they were entitled. 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.’
Ms Court said that pricing failures are an industry-wide issue.
‘RACQ is not the only insurer to have reported pricing failures to us,’ she said. ‘ASIC has previously taken action against Insurance Australia Limited, and 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,’ she said.
The RACQ product disclosure statements have since been updated and it has committed to a remediation program for a range of pricing promise failures, not limited to those failures outlined in this release. Up to 500,000 members are expected to receive refunds, with RACQ reporting the total cost to RACQ could reach up to $220 million.
RACQ self-reported the pricing failure after ASIC called on general insurers to review their pricing practices in October 2021. ASIC will deliver a report on its review of pricing practices in the insurance industry in the first half of 2023.
ASIC’s Moneysmart website features information that supports Australian consumers make decisions about insurance. It’s important to compare policies from different insurers and to shop around for the best value for money. Find out more about choosing car insurance and home insurance.