RACQ penalised $10M for pricing discount failures

The Federal Court has imposed a $10 million-dollar penalty on RACQ Insurance Limited (RACQ) for misleading customers in its product disclosure statements (PDSs).

In civil penalty proceedings brought by ASIC, RACQ was found to have promised certain discounts on optional benefit covers that it failed to deliver the full value of to some customers.

Between February 2017 and March 2022, RACQ provided PDSs for RACQ Motor, Household, Caravan and Unique Vehicle insurance policies stating that any discounts for which the customer qualified would apply to the entire premium payable, including to any optional benefits premiums.

RACQ did not, in all cases, apply the discount to the optional benefits premium.

The Court held that RACQ contravened the law on over 5 million occasions, resulting in approximately 458,746 customers missing out on around $86,476,339 in discounts.

RACQ admitted to the contraventions and the parties jointly submitted to the Court that the penalty sought by ASIC was appropriate. RACQ was also ordered to pay ASIC’s costs.

RACQ is in the process of remediating affected customers, which it says will be substantially completed by February 2024.

ASIC identified pricing promises in insurance as an enforcement priority for 2023, and in a statement following the decision, Deputy Chair Sarah Court said, ‘Consumers need to be able to rely on the pricing promises made to them by insurers, and insurers need to make sure that they pass on those promises in full.’

ASIC has delivered on its 2023 Enforcement Priority of targeting Insurance Industry Conduct in its penalty case against RACQ.  

The sector remains in ASIC’s focus with Insurance Claims handling identified as a 2024 priority, a narrower scope than 2023, no doubt following on from work done by ASIC in its review of claims handling released in August 2023.

Since announcing Annual and Enduring Enforcement Priorities for the first time in 2023, ASIC has established a track record of delivering regulatory outcomes, often in the form of civil penalty action against large organisations. The RACQ penalty is a case in point.  

Consistent with this, the Insurance Industry can expect action to come in relation to claims handling in the next twelve months or already to be in play, off the back of ASIC’s August 2023 review.

ASIC’s media release on the RACQ penalty is here.

The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.