IAG will fight a class action launched over home and contents loyalty discounts, saying its businesses have delivered on promises made to customers. 

The Slater and Gordon class action relates to RACV, SGIO and SGIC renewals that are also the subject of Federal Court action brought by the Australian Securities and Investments Commission. 

Slater and Gordon says more than 1 million people renewed their insurance with the brands over the six-year period for which the claim is brought, and the class action could be worth millions of dollars. 

The law firm alleges the insurer engaged in misleading, deceptive and unconscionable conduct by telling customers they were receiving loyalty discounts, when they may in fact have been charged an artificially higher base premium so the price was not cheaper. 

Class actions practice group leader Ben Hardwick says a pricing algorithm identified a customer’s perceived price elasticity, with policyholders deemed unlikely to switch insurers facing steeper premium increases. 

“Those customers who were loyal and were sticking with their insurance company were labouring under the misapprehension that they were getting a discount on their insurance policies, when in fact the insurers were ramping up their base premiums before the discount was applied,” he said.

As a result of the pricing algorithm, new customers were typically paying less for their policies than loyal customers who had been with the insurer for more than 20 years, he says. 

IAG says subsidiaries Insurance Australia Ltd (IAL) and Insurance Manufacturers of Australia (IMA) “maintain they have delivered on loyalty promises made to customers and do not agree that they have misled customers about the extent of the discounts they would receive”.  

“IAL and IMA intend to defend the proceedings commenced by Slater and Gordon,” the company said.  

RACV, SGIO and SGIC provided the home and contents policies to customers in Victoria, WA and SA respectively. 

Slater and Gordon is investigating another class action around similar issues at NRMA Insurance, and has invited potential participants to register their interest. 

The Federal Court pricing promises matter brought by ASIC, which IAG is also defending, is scheduled for a case management hearing on October 3.