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Class action filed against IAG after ‘millions’ impacted
IAG has been hit with a class action after millions of customers who renewed their home and contents insurance policies were allegedly misled into believing they were getting a discount while actually paying more.
Lauren Croft
A class action has been filed in Victoria’s Supreme Court against Insurance Australia Group (IAG) after it offered loyalty discounts to get customers to renew home and contents policies.
According to the class action, which is being held on a no-win-no-fee basis, the insurers allegedly informed policyholders that they were receiving the discounts based on the number of years they had been with the insurer and/or the number of other insurance policies they had, for example, car insurance with the same brand.
Slater & Gordon class actions practice group leader Ben Hardwick said a computer program pricing algorithm was being used to identify the likelihood of policyholders staying with the same brand if their home and contents insurance premiums increased, compared to those who were likely to shop around for an alternative insurer.
“We’re alleging that millions of Australians paid premiums year on year to these IAG insurers on the promise that they were getting a discount. But in reality, because of this pricing algorithm they were using, new customers were typically paying less for their policies than loyal customers who had been with them for more than 20 years,” he said.
“The higher the computer program identified a customer’s perceived price elasticity, the lower the annual premium increases the customer would receive, so loyal customers who were assessed as having low price elasticity and were unlikely to leave, faced steeper increases to their premiums.
“This class action alleges that these customers were denied all relevant information they should have had access to before they renewed their home and contents policies so they could make an informed choice about whether to shop around for a better deal or, at the very least, ask for a better price. The reality is that they are likely to have received cheaper insurance from these brands had their loyalty not been a factor in their renewal calculations at all.”
The insurers are accused of breaking financial services laws, among other obligations, and the class action claims they “knew or ought to have known” that they were not acting in their customers’ financial interests.
“Home and contents insurance is among the biggest household expenses that everyday Australians face each year, so to learn that these insurers have allegedly been taking advantage of loyal customers in such a way, we say, is unlawful,” Hardwick said.
“This class action is seeking compensation for affected customers for the losses and damage they have suffered as a result of IAG’s conduct.”
Lead plaintiff Angela Williams has had home and contents insurance with RACV for more than 20 years.
“I thought I was getting a good deal. If I had known that RACV was actually charging me a higher base premium because of a pricing algorithm, I would have switched right away,” she said.
“I thought they were trustworthy, so it’s really disappointing to hear that they’ve basically been taking advantage of loyal customers in order to make a quick buck.”
SGIO customer Debra Dawson is the class action’s other lead plaintiff and has had contents insurance with SGIO for 16 years, staying with them so long because of a loyalty discount.
“I thought that the discount was an advantage I couldn’t get with another insurer. That’s why I never sought to renew my policy with another insurer,” she said.
Slater & Gordon is also investigating a separate class action into similar conduct at another IAG-owned brand, NRMA, on behalf of millions of other Australian home and contents insurance policyholders.
“These legal proceedings should put all insurance companies on notice that this kind of misleading, deceptive and unconscionable conduct will be acted upon by consumers,” Hardwick said.
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Lauren Croft
Lauren is a journalist at Lawyers Weekly and graduated with a Bachelor of Journalism from Macleay College. Prior to joining Lawyers Weekly, she worked as a trade journalist for media and travel industry publications and Travel Weekly. Originally born in England, Lauren enjoys trying new bars and restaurants, attending music festivals and travelling. She is also a keen snowboarder and pre-pandemic, spent a season living in a French ski resort.
