The Australian Securities and Investments Commission (ASIC) has called on all general insurers to remove unnecessary pricing complexity and fix their systems, practices and controls.
This follows the release of its report, When the Price is Not Right: Making Good on Insurance Pricing Promises, which reveals that continuing pricing failures will see general insurers repay $815 million to more than 5.6 million consumers across 6.5 million policies.
Deputy Chair of ASIC, Karen Chester said the systemic failure by insurers to deliver on their pricing promises had seen more than 5.6 million consumers over-charged $815 million for their insurance.
“The report follows ASIC’s intervention in October 2021, which saw 11 general insurers directed to complete comprehensive reviews to find, fix, report and repay for pricing failures,” Ms Chester (pictured) said.
“The insurers reviewed 2,000 price promises across more than 500 general insurance products and 50 brands.”
She said ASIC had also begun civil penalty proceedings against Insurance Australia Limited in 2021 and RACQ Insurance Limited in 2023 for allegedly failing to honour pricing promises or misleading customers.
“ASIC’s report reveals three main causes for the systemic pricing failures — first, unnecessary complexity in pricing promises and pricing practices, accounting for the lion’s share,” Ms Chester said.
“Second, persistent under-investment in systems, controls and data; third, and perhaps the most disappointing, insurers’ inaction despite being on notice for years about these pricing risks.”
She said it was beyond disappointing that despite past ASIC warnings and action, it took a 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,” Ms Chester said.
