Millions of Australians have been overcharged for insurance and are now owed more than $800 million in repayments.
The findings from a report published by the Australian Securities and Investments Commission (ASIC) last week uncovered pricing failures in more than 6.5million insurance policies.
The report named several companies at fault, including Insurance Australia, AAMI, Suncorp, and the RAC Group, as well as more than a dozen smaller insurance operators.
Don’t trust dodgy discounts
Many of the pricing failures, according to ASIC, were attributed to poor governance, risk control and systems, with an estimated $379 million in overcharges put down to price floor practices.
What are price floor practices?
Price floors prevent a price from going below a certain level. When a price floor is established that is higher than the equilibrium price, the quantity supplied will then go beyond the quantity demanded. The result – excess supply (surplus).
When it comes to price floors in the insurance industry and the practice’s impact on so many Australians being overcharged, ASIC said that many customers failed to receive promised discounts.
The ASIC report revealed 2000 promises related to insurance pricing in an investigation conducted from 2018 to 2023.
The results revealed “little consistency” in fulfillment of these promises, including cases where deals and promotions offering cashback bonuses and gift cards were not applied correctly. And that left many policy holders short-changed and disgruntled.
In other cases, ASIC found insurers were providing inaccurate descriptions of potential discounts. These issues saw overcharges that tallied around $242million, with $76million in overcharging directly related to insurance providers improperly applying eligibility criteria to the offer of discounted premiums.
“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,” said ASIC deputy chair Karen Chester.
What happens if you’ve been overcharged?
If you’re one of the 5.6 million Australians who are victims of the overcharging, ASIC says the money will be repaid.
“It’s now up to the boards of general insurers to ensure the prompt and full repayment of the $815 million owed to their 5.6 million customers, implement the fixes needed and rebuild consumer trust,” said Ms Chester.
Have you been overcharged by your insurer? Has it made you find a new insurance provider? When did you first learn you had been overpaying? Share your stories in the comments section below.
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Good morning all, well, at last, some insurance companies have been found out for what they are – I am currently fighting AAMI for a refund of monies taken from our bank account for a cancelled policy – it is not a great amount, however, at 83, every cent counts for us. I am sorry to say, they are the worst company I have EVER dealt with – their advice is none existent and, believe it or not, I have been dealing with 13 different people who I think are robots as I get the same answer every time, just worded differently. So, to AAMI, pull some of these ladies you have in your stupid adds, maybe, just maybe you will have someone who is polite and understanding – but I doubt it.
How do you know that you have been overcharged? Is this automatic if you have been overcharged?
My thought exactly Anniem. After all we all think our policy premium for any insurance is far higher then it should be.
Now I know why our house and contents insurance has risen exponentially!