IAG Faces New Allegations Amid Loyalty Pricing Scandal

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

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
Author: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Clear

Australian Farmers Confront Rising Insurance Premiums Amid Climate Challenges

22 Mar 2026: Paige Estritori

Australian farmers are currently grappling with a significant surge in insurance premiums, with increases ranging from 20% to 40%, depending on the insurer. This escalation is primarily driven by the rising frequency and severity of natural disasters, coupled with a contracting underwriter market and escalating costs of goods and services. - read more

Widespread Rural Crime Exposes NSW Farmers to Repeated Victimisation

22 Mar 2026: Paige Estritori

A recent survey conducted by WFI Insurance in collaboration with the University of New England (UNE) Centre for Rural Criminology has unveiled alarming statistics regarding rural crime in New South Wales. The findings indicate that over 90% of NSW farmers have encountered criminal activities on their properties, with approximately 30% reporting being targeted seven or more times. - read more

Elders Insurance Highlights Increased Summer Storm Risks for Farmers

22 Mar 2026: Paige Estritori

As the Australian summer approaches, Elders Insurance has issued a cautionary advisory to farmers, emphasising the heightened risk of storm-related damages during this season. Recent data indicates a significant increase in insurance claims due to summer storms, underscoring the need for proactive measures to safeguard agricultural assets. - read more

CGU and WFI Collaborate with Ag Guard to Boost Farm Insurance Services

14 Mar 2026: Paige Estritori

In a significant development for Australia's agricultural sector, CGU and WFI Insurance have announced an exclusive partnership with Ag Guard, a technology-driven agricultural insurance agency. This collaboration, set to commence in June 2026, aims to bolster the agricultural insurance capabilities of both insurers and enhance digital services for brokers, partners, and customers. - read more

Insurance Council Declares Significant Events for Northern Territory and Queensland Floods

14 Mar 2026: Paige Estritori

The Insurance Council of Australia (ICA) has declared two Significant Events in response to the severe rainfall and flooding that have recently impacted the Northern Territory and Queensland. This declaration pertains to the flooding in Katherine and surrounding regions in the Northern Territory, as well as the Bundaberg region and Burnett River catchment in Queensland. - read more

Insurance Council Advocates for Climate Resilience Investment on Cyclone Alfred Anniversary

14 Mar 2026: Paige Estritori

Marking one year since Tropical Cyclone Alfred caused $1.5 billion in insured damages and an estimated $2.7 billion in total economic losses, the Insurance Council of Australia (ICA) has renewed its call for urgent investment in climate resilience. The ICA emphasises the need for proactive measures to mitigate the impact of extreme weather events, which are becoming more frequent and severe due to climate change. - read more

Click for more Insurance News