Insurance Australia Group (IAG) has issued an update regarding the Federal Court case involving a class action against its subsidiary, Insurance Australia Limited (IAL), over business interruption insurance claims linked to COVID-19.
On Sep. 20, 2024, the Federal Court ruled that it intended to declassify the representative proceeding. A subsequent case management hearing on Dec. 5, 2024, led to orders confirming that:
The representative applicant in the case did not seek leave to appeal the orders before the deadline expired.
In response, IAG has reassessed its business interruption provision. Based on an actuarial review and pending final approval from its board and auditors, the insurer expects to release $200 million from its existing $380 million provision.
The remaining amount is set aside for potential additional claims. This adjustment will be reflected in the company’s financial results for the six months ending Dec. 31, 2024, under the “Net Corporate Expense” category.
IAG plans to release its half-year financial results on Feb. 12.
The update on the class action brings to light Slater & Gordon’s class action against NRMA Insurance, alleging the insurer engaged in misleading pricing practices on home and contents policies.
The lawsuit, filed in the Supreme Court of Victoria in December, claims the insurer’s pricing structure resulted in long-term customers paying more than new customers, despite promotional offers for loyalty discounts.
The firm’s statement of claim alleges that policies issued by IAL under the “Get Your Insurance Back” campaign led to some customers unknowingly paying higher base premiums.
“We’re alleging that millions of Australians paid premiums year-on-year for NRMA home insurance on the promise that they were getting a discount,” said Ben Hardwick, Slater & Gordon’s class actions practice leader. “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.”
The firm contends that this pricing approach may amount to misleading and deceptive conduct and could breach the Australian Securities and Investments Commission (ASIC) Act. A case study cited in the claim describes a customer who had insured with NRMA since 1989 and saw a 60% premium increase. According to the firm, the same policy was available at a significantly lower cost under a different name.
In response, IAG confirmed that IAL intends to defend the claims.
