ASIC is calling on all general insurers to remove unnecessary pricing complexity and fix their systems, practices and controls so they can deliver on the pricing promises they make to their customers.
ASIC today released Report 765 When the price is not right: Making good on insurance pricing promises. The report reveals that ongoing pricing failures will see general insurers repay $815 million to more than 5.6 million consumers (across 6.5 million policies).
‘This systemic failure by insurers to deliver on their pricing promises has seen more than 5.6 million consumers overcharged $815 million for their insurance,’ said ASIC Deputy Chair Karen Chester.
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. The insurers reviewed 2,000 price promises across more than 500 general insurance products and 50 brands.
ASIC has also commenced civil penalty proceedings against Insurance Australia Limited in 2021 (see 21-270MR) and RACQ Insurance Limited in 2023 (see 23-038MR) for allegedly failing to honour pricing promises or misleading customers.
‘We have already commenced related civil penalty proceedings against two insurers, in 2021 and 2023, and we have further investigations underway,’ said ASIC Deputy Chair Karen Chester.
The report also finds:
general insurers did not have adequate product governance, systems, data and controls in place to deliver on their pricing promises;
pricing promises and pricing practices were unnecessarily complex; and
insurers did not always have adequate oversight and controls over the pricing promises made or delivered by the distributors of their products.
Deputy Chair Karen Chester said, ‘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 (at least $379 million) of the remediation. Second, persistent underinvestment in systems, controls and data. Third, and perhaps the most disappointing, insurers’ inaction despite being on notice for years about these pricing risks.’
On 15 October 2021 ASIC called on all general insurers to undertake a review of their pricing systems and controls as a matter of priority (21-270MR). This followed a significant increase in pricing related breach reports. ASIC subsequently wrote to 11 general insurers in late October 2021 (collectively representing around 68% of the general insurance market in Australia) directing them to complete a comprehensive pricing review.
‘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,’ said Ms Chester.
‘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,’ added Ms Chester.
