Australian law firm Slater and Gordon is looking into filing a class action lawsuit against Insurance Australia Group (IAG) subsidiaries over loyalty discount issues for certain types of home insurance.
Slater and Gordon has been setting up the potential class action against Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia (IMA) on behalf of RACV, SGIO, and SGIC policyholders who were allegedly misled by the insurers, according to News.com.au.
On its website, the law firm confirmed that it has been investigating potential misconduct related to the pricing of the home and contents insurance policies of RACV, SGIO, and SGIC.
Slater and Gordon's decision to investigate potential misconduct that could lead to a class action against IAG and IMA follows the Australia Securities and Investments Commission's (ASIC) move to start civil penalty proceedings against IAL and IMA.
ASIC claimed that IAL and IMA misled their customers about the loyalty discounts available for certain types of home insurance, noting that using loyalty discounts to encourage customers to renew their home insurance policies was misleading because the customers might have had their premiums increased before the discounts were applied.
“We allege that IAG subsidiaries, IAL and IMA, misled their customers about the extent of the discounts they would receive,” said ASIC Deputy Chair Sarah Court. “The way they operated their pricing algorithm meant that some longer term or more loyal customers were allocated, or may have been allocated, higher premiums before the promised discounts were applied.”
Slater and Gordon class actions associate Henry Hamilton-Lindsay agreed to ASIC's statement, further explaining that the insurers used an algorithm to determine which customers were least likely to change their insurer in response to increased premiums.
“IAL and IMA used an algorithm to determine who was most likely to renew their policy and took steps to increase those customers' base premiums, despite them often being long-term customers,” Hamilton-Lindsay said, as reported by News.com.au. “We believe that there may be hundreds of thousands of Australians who thought they were receiving discounts by remaining loyal IAL and IMA home insurance customers. But, in reality, they were being charged hundreds of dollars more each year as a result of that loyalty. We believe that money belongs in the pockets of everyday Australians, particularly given the rising cost of living.”
