Millions Of Customers In Class Action Against IAG Over High Premiums

IAG will defend a class action lawsuit filed by Slater and Gordon on behalf of millions of RACV, SGIO and SGIC customers over ‘loyalty discounts’ offered by the insurer to renew home and contents policies.

The statement of claim, filed in Victoria’s Supreme Court, accuses the IAG brands of engaging in misleading, deceptive and unconscionable conduct by informing customers that they received loyalty discounts at the time of renewal, when they may actually have been charged an artificially higher base premium.

It is alleged that between 2018 and 2024, policyholders were informed they received discounts based on the number of years they had been with the insurer and/or the number of other policies they had with the same brand.

In a brief statement, IAG said it intended to defend proceedings brought against its subsidiaries Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia (IMA). “IAL and IMA maintain they have delivered on loyalty promises made to customers and do not agree that they have misled customers about the extent of the discounts they would receive,” the group said.

Ben Hardwick, Class Actions Practice Group Leader at Slater and Gordon, said a pricing algorithm was used by the insurers 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,” said Hardwick.

“The higher the computer programme 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 class action claims the insurers’ conduct was in contravention of financial services laws, among other obligations, and that they knew or ought to have known that their conduct was not 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,” said Hardwick.

“This class action is seeking compensation for affected customers for the losses and damage they have suffered as a result of IAG’s conduct.”

In a further blow to IAG, Slater and Gordon said it will launch a separate class action investigation into another group-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,” said Hardwick.