Insurers Accused of Exploiting Loyalty

3

The lawsuit, representing customers of SGIO, RACV, and SGIC, alleges that these insurers promised loyalty and multi-policy discounts but ultimately charged higher base premiums. The deceptive practices purportedly stemmed from a computer algorithm designed to manipulate loyalty metrics.

Slater and Gordon’s Ben Hardwick revealed that this algorithm, which ought to favor longstanding clients, actually penalized them. According to Hardwick, “We’re alleging millions of Australians paid higher premiums yearly on the illusion of discounts, when new customers often enjoyed lower rates.”

This pricing tactic leveraged a customer's perceived likelihood to remain with the insurer even as prices rose. Hardwick explained, “Loyal customers, misjudged as having low price sensitivity, faced steeper price hikes compared to others leaning towards switching providers.”

As a result, many long-term policyholders, unaware of the true extent of their premiums, couldn’t make informed decisions regarding their insurance costs. “They would've likely secured cheaper policies had their loyalty not been factored into the pricing algorithm,” Hardwick added.

The broader implication is substantial as household insurance remains one of the significant annual expenses. It is profoundly disappointing for these customers to see their loyalty rewarded with higher charges, ultimately perceived as unlawful profiteering. The legal move aims to gain compensation for adversely affected customers.

Angela Williams, an RACV policyholder for over two decades, echoed the sentiments, saying, “I thought I was securing good deals. Knowing the involvement of a pricing algorithm manipulating my premiums because of my loyalty is shocking.” Similarly, Debra Dawson, a 16-year-long SGIO client, forgone comparative shopping believing her discounts were exclusive benefits. “Had I known, I would’ve considered alternatives,” she remarked.

IAG, responding to these charges, assured that these practices were already under scrutiny due to a previous legal challenge by ASIC. A spokesperson stated, “We uphold we have honored our loyalty commitments and will defend against this class action, striving to continually provide reliable service to our customers.”

This case underscores the delicate balance of customer loyalty and ethical business practices, highlighting how crucial transparency is for consumer protections in the complex field of financial services.

Published:Friday, 31st May 2024
Source: Paige Estritori

Share this news item:

Insurance News

Clear

National Climate Risk Assessment Unveils Growing Insurance Challenges

17 Sep 2025: Paige Estritori

The Australian government has unveiled its inaugural National Climate Risk Assessment alongside a comprehensive National Adaptation Plan, highlighting the heightened impact of natural disasters on insurance accessibility across the nation. With an urgent call to action, the government acknowledges the impending climate threats and commits to intensifying efforts towards emission reduction. - read more

ASIC Extends Relief on Distribution Rules for Insurance Providers

16 Sep 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has announced an extension of the exemption allowing general insurance providers to forego appointing product distributors as authorised representatives. This decision comes with the introduction of a new legislative instrument, 2025/520, which renews the previous framework, originally established under instrument 2015/682. The relief will now continue until August 27, 2030. - read more

Cyber Insurance Becomes Essential Amid Rising Digital Threats

12 Sep 2025: Paige Estritori

The recent cyberattack on Fortnum Private Wealth, accompanied by ASIC's legal action, has spotlighted the critical risks cyber threats pose to financial advice companies in Australia. With digital integration intensifying across the finance sector, the owner of Fortnum, Entireti, plans to defend the case, underscoring the necessity for ongoing vigilance in cybersecurity measures. - read more

Swiss Re Foresees Rising Premiums Amid Increasing Global Risks

10 Sep 2025: Paige Estritori

In a comprehensive analysis, Swiss Re Institute predicts that global property and casualty insurance premiums will rise in tandem with GDP over the upcoming decade. This growth is driven by amplified natural catastrophe losses, asset accumulation, and heightened economic and litigation claims inflation. The institute's report outlines the evolving insurance landscape amid increasing global risks. - read more

Insurance Council of Australia Assists NSW Flood Claimants

09 Sep 2025: Paige Estritori

In response to the devastating floods that swept across New South Wales' Mid North Coast in May, the Insurance Council of Australia (ICA) is taking proactive steps to support the affected residents. Insurers, organised by the ICA, will be meeting with flood victims in Kempsey, Taree, and Port Macquarie to provide guidance and support as they navigate their insurance claims. - read more

Ombudsman Upholds Policyholder’s Claim Despite Fraud Allegations

08 Sep 2025: Paige Estritori

A motor insurance policyholder has won a significant dispute over fraud allegations, with the industry ombudsman ruling in favour of a payout following a controversial car accident claim. The case revolved around an incident where the claimant's wife crashed at an intersection one evening, reportedly failing to yield. The lack of photographic evidence due to shock and subsequent involvement of towing services complicated matters. - read more

Click for more Insurance News