Watchdog sues RACQ for ‘misleading’ insurance customers

The corporate watchdog is suing the RACQ claiming it misled customers about the amount of discounts it would receive on a range of insurance policies.

The corporate watchdog is suing the RACQ claiming it misled half a million customers about the amount of discounts it would receive on a range of insurance premiums.

The Australian Securities and Investments Commission (ASIC) has launched proceedings in the Federal Court against the Queensland motoring club over product disclosure statements for home, motor, caravan and trailer insurance.

ASIC deputy chair Sarah Court said the watchdog will allege the statements were misleading because the discounts were only applied by the RACQ to base premiums and not for certain optional extras. “We allege that the RACQ misled its customers about the discounts to which they were entitled,” said Ms Court.

“The failure by insurers to deliver on pricing promises is a key priority for ASIC and we will continue to take enforcement action to hold insurers to account.”

RACQ announced last year will refund half a million of its members a total of up to $220m after they did not get promised discounts on their insurance premiums.

The motoring and insurance group said that it had self-reported a regulatory breach to ASIC after finding some of the wording in its product disclosure statements “was inadequate in describing how several of our discounts were applied to premiums.”

Sarah Court, ASIC Deputy Chair.

RACQ chief executive David Carter said in August that the total refund to members was estimated to be in the range of $200-$220m, including applicable duties, taxes and interest.

Ms Court said RACQ was not the only insurer being sued by the corporate watchdog over alleged misleading of customers. ASIC also has launched civil penalty proceedings in the Federal Court against Insurance Australia Limited (IAL) following its alleged failure to honour discount promises made to its customers. ASIC alleges that IAL engaged in misleading or deceptive conduct and made false or misleading representations to some NRMA Insurance customers by stating that customers were eligible for certain discounts on renewal of their home and motor insurance policies and then failing to apply those discounts.

ASIC in 2021 called on general insurers to review their pricing practices, systems and controls as a matter of priority to ensure customers get the full discounts they are promised.

This followed industry wide failures that had already led to more than $400m in remediation being paid to more than two million home, car and other insurance customers since 2018.

RACQ in a statement said it apologises for the errors “as they are not in keeping with our high standards and values. “The club has been undertaking a significant investment in its systems and processes that will deliver improved outcomes for members and result in stronger risk management, simplified products, and easier processes for its people,” it said. “Given the matter is before the court we are unable to comment any further.”

RACQ chief executive officer David Carter