About one in three Australian adults are owed money from a compensation pool of $815 million after being overcharged on insurance policies.
General insurers have overcharged more than 5.6 million consumers and will need to make the repayments and fix their pricing promises, the corporate watchdog said in a damning report on Friday.
The cause was systemic pricing failures across the majority of insurers.
Looking for a new job or job candidate? Post jobs and search for local talent on 7NEWS Jobs >>
Pricing promises and practices that were unnecessarily complex were responsible for at least $379 million of the compensation due, the Australian Securities and Investments Commission (ASIC) said.
Persistent underinvestment in systems, controls and data also contributed to the failures.
It comes as several insurers face legal action over allegations of unfair terms and misleading customers.
Insurers had been on notice for years about pricing risks but had not taken any action, ASIC said.
In 2021, 11 insurers representing two-thirds of the general insurance market in Australia were directed to complete comprehensive reviews to “find, fix, report and repay” for pricing failures.
Investigations were launched into the overcharging of customers and suspected failures to deliver promised price discounts.
The insurers reviewed 2000 price promises across more than 500 general insurance products and 50 brands.
“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,” ASIC deputy chair Karen Chester said.
“Earlier action by insurers would have avoided much of the consumer harm we now see, with $815 million in remediation.”
Civil penalty proceedings against some of Australia’s largest insurers — including IAL and RACQ — for allegedly failing to honour pricing promises and misleading customers are also under way.
“We have already commenced related civil penalty proceedings against two insurers, in 2021 and 2023, and we have further investigations underway,” Chester said.
HCF Life Insurance is contesting an ASIC lawsuit accusing it of misleading customers through unfair use of the term “pre-existing condition” in life insurance policies.
If you’d like to view this content, please adjust your .
To find out more about how we use cookies, please see our Cookie Guide.