General insurers will pay a total of $815 million in refunds to customers after being called out for overcharging and failing to meet pricing promises made at the time of signing them up to policies.
From the start of 2018 to now, 5.6 million consumers have been affected by 'pricing failures' from major insurance companies, according to a report by the corporate regulator the Australian Securities and Investments Commission (ASIC).
ASIC examined more than 300,000 documents and 30,000 call centre calls and found insurers did not have proper product governance systems in place to deliver on their often complex pricing promises.
ASIC says insurers ignored warnings
The report comes after ASIC wrote to 11 general insurers in October 2021 ordering them to complete comprehensive reviews of their pricing systems.
"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," ASIC deputy chair Karen Chester says.
"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."
CHOICE's head of policy and government relations Patrick Veyret welcomed ASIC's spotlight on what he called "shameful conduct" by the insurance industry.
"At a time when people are facing acute cost of living pressures, insurers need to do much better by their customers and the community," he says.
"It's pretty simple – people expect honesty and fairness in the promises made by insurers. However, many failed in this very basic obligation. This is a shameful breach of a trust on a systemic level and insurance companies are firmly in the crosshairs of ASIC."
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