Australia sues IAG’s unit for allegedly misleading thousands of customers

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-The Australian Securities and Investments Commission on Tuesday initiated Federal Court proceedings against RACQ Insurance, a unit of Insurance Australia Group, alleging the insurer misled thousands of customers with false premium comparison pricing in renewal documents over a five-year period.

Between September 2019 and December 2024, Royal Automobile Club of Queensland Insurance sent over 570,000 renewal notices containing a “last period premium”, an amount that ASIC claims was often inflated compared to the actual amount customers paid.

In some cases, this distortion led to a significant misrepresentation of premium increases, ASIC alleges.

Insurance Australia Group, the country’s biggest general insurer, had completed its acquisition of a 90% stake in RACQ Insurance earlier this month, in a deal that also includes a 25-year distribution agreement.

“During a cost-of-living crisis, we believe RACQ misled thousands of customers by including false comparison pricing in their renewal documents,” ASIC Deputy Chair Sarah Court said, emphasizing that customers may have been left paying more as a result.

The regulator’s complaint highlights that RACQ’s practices may have hindered customers from accurately assessing and comparing premiums across insurers, potentially depriving them of cost-saving opportunities.

It also alleges that RACQ was aware of the misleading nature of its renewal notices shortly after implementing the practice, receiving customer complaints within days but failing to take corrective action for years.

RACQ’s alleged misrepresentation covered multiple insurance types, including home and contents, car, caravan, boat and pet insurance, according to the regulator’s statement.

ASIC intends to seek civil penalties, declarations and publicity orders from the Court, it said.

Later on Tuesday, RACQ acknowledged ASIC’s proceedings. It said in a statement that it had self-reported the issue regarding annual comparison price on renewal notices for its insurance policies following a media enquiry in 2024.

RACQ said that it has since been cooperating with the regulator while also conducting its own internal review, and will be working through this process with ASIC to finalise the matter.

(Reporting by Adwitiya Srivastava in Bengaluru; Editing by Alan Barona)