Insurer QBE accused of misleading customers on price discounts
The insurance major is accused of misleading customers on discounts for products including home, contents and car protection.
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Insurance giant QBE allegedly wrongly charged more than 500,000 customers for at least five years, according to the corporate regulator, which has dragged the ASX-listed underwriter to court.
In filings lodged on Wednesday, the Australian Securities & Investments Commission said QBE spruiked discounts to customers for years without actually passing them through.
ASIC, the regulator of financial services, claims QBE told the customers – stretching from retirees and seniors to those with no claims or multiple policies – that they were entitled to discounts on their insurance.
But ASIC claims QBE failed to honour these discounts, instead slugging hundreds of thousands of customers with higher charges due to internal systems that limited any reduction in prices.
ASIC claims QBE’s “Minimum Premium Mechanism” and “Cupping Mechanism” put limits on how much of a discount customers could be entitled to, often reducing discounts to nil.
Despite this, QBE continued to spruik its discounts to customers in product disclosure statements and advertising.
ASIC claims QBE “engaged in conduct that was liable to mislead the public as to the nature”, contravening the ASIC Act.
“Customers who purchased insurance products were also denied the opportunity to make properly informed decisions about whether to do so and on what terms, and may have formed mistaken views about the value or suitability of those products,” ASIC alleges.
ASIC deputy chair Sarah Court said QBE’s discount failures harmed the competitive insurance market and customers.
“This issue is not a new one,” she said.
“We say that QBE knew that some of these pricing mechanisms were applying so that consumers were not getting the full discounts promised.”
The action comes after similar court action against rival insurers IAG and IMA.
IAG received a $40m penalty after failing to honour pricing discounts with customers who held NRMA policies.
The latest case against QBE comes in the wake of an insurance pricing review by the industry, after IAG disclosed its discount failures to ASIC. IAG remains before the court over discount failures on its home insurance policies.
An ASIC review found 11 insurers had failed to deliver pricing discounts, including Suncorp, Allianz, Hollard, Youi, and Auto and General which operates the Budget Direct brand.
QBE reported its discounting failures in 2022.
Ms Court said ASIC would “continue to take action to hold insurers to account”, noting pricing promises by the sector remained a “key priority” for the regulator.
“Where insurers make discount promises to renewing customers, they need to have robust systems and controls in place to make sure their customers receive the discounts they were promised,” she said.
“The industry is clearly on notice in relation to our concerns on this issue.”
ASIC says it is seeking civil penalties against QBE in the Federal Court.
It coincides with a separate high-profile pricing case against supermarket majors Coles and Woolworths, brought by the competition regulator.
QBE on Wednesday acknowledged the proceedings and said it had reported pricing inconsistencies to ASIC, co-operated with the regulator’s investigation and commenced a customer remediation program in July 2022.
The ASX-listed commercial and personal insurer said it had extensively reviewed its insurance pricing practices in 2022, with more than $US70m ($105m) repaid to customers.
“QBE apologises for the inconsistencies. QBE understands the importance of meeting its promises to its customers,” the insurer said.
“QBE will review the pleadings and continue to work with ASIC on these matters.”
Its shares closed down 0.6 per cent at $17.05, against a modest rise in the S&P/ASX200 index.
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Originally published as Insurer QBE accused of misleading customers on price discounts
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