ASIC report finds insurance ‘price failures’
![Dollar sign in front of barrier](https://financialnewswire.com.au/wp-content/uploads/Shutterstock_2108333201.jpg)
A new report from the Australian Securities and Investments Commission (ASIC) found pricing failures committed by general insurers have continued despite previous action in 2021, resulting in $815 million overcharged to over 5.6 million consumers.
The report, titled When the price is not right: Making good on insurance pricing promises, comes in the wake of ASIC intervention in October 2021 and civil penalty proceedings commenced in 2021 and 2023.
After an increase in pricing-related breach reports, ASIC had directed 11 general insurers (or 68 per cent of the Australian market) to execute comprehensive reviews of their pricing systems and controls and “find any problems, fix any deficiencies and repay customers who had been overcharged” for pricing failures, resulting in 2,000 price promises reviewed across over 500 general insurance products and 50 brands.
ASIC’s civil penalty proceedings against Insurance Australia Limited in 2021 followed the insurer’s failure to honour discount promises made to its customers, alleging it engaged in “misleading or deceptive conduct and made false or misleading representations” by not applying the promised discounts totalling around $60 million to at least 596,000 customers.
RACQ Insurance Limited was also hit by the corporate watchdog this year for allegedly misleading customers about discounts available on certain covers in its product disclosure statements. While the statements have since been updated, the insurer has also committed to a remediation program to rectify this pricing promise failure and several others with around 500,000 members expected to receive refunds worth up to a reported $220 million.
“ASIC’s report reveals three main causes for the systemic pricing failures,” ASIC Deputy Chair, Karen Chester, said.
“First, unnecessary complexity in pricing promises and pricing practices—accounting for the lion’s share (at least $379 million) of the remediation. Second, persistent underinvestment in systems, controls and data. Third, and perhaps the most disappointing, insurers’ inaction despite being on notice for years about these pricing risks.
“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. 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.”
The report also found that:
- “general insurers did not have adequate product governance, systems, data and controls in place to deliver on their pricing promises;
- pricing promises and pricing practices were unnecessarily complex; and
- insurers did not always have adequate oversight and controls over the pricing promises made or delivered by the distributors of their products.”
Of course, can’t expect APRA or ASIC to actually really do anything against Industry / Union / Bikkie Super Funds.…
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