The Australian Securities and Investments Commission has launched Federal Court action against QBE over alleged pricing discount failures that may have affected more than 500,000 customers.

The regulator says the way in which pricing mechanisms were applied reduced the value of the discounts, including to zero, in certain circumstances.

“The failure by insurers to deliver on pricing promises is a key priority for ASIC and we will continue to take action to hold insurers to account,” deputy chair Sarah Court said today.

“Where insurers make discount promises to renewing customers, they need to have robust systems and controls in place to make sure their customers receive the discounts they were promised.”

The discounts were offered through renewal notices to retirees, loyalty customers, shareholders, insureds holding multiple QBE policies and those who had made no claims. Offers of discounts were also made in product disclosure statements published on the insurer’s website.

The post-discount application of customer pricing calculations, including a minimum premium system and a cupping and capping mechanism, effectively reduced the discount value in certain circumstances, ASIC says.

QBE said today the proceedings relate to previously reported inconsistencies in the delivery of price promises made to customers with caravan, householders, marine and motor policies issued between July 1 2017 and September 24 2022.

The company says that following an external pricing practices review, it has taken steps to address inconsistencies, reported the issues to ASIC and co-operated with the regulator’s investigation. 

“QBE apologises for the inconsistencies. QBE understands the importance of meeting its promises to its customers. QBE will review the pleadings and continue to work with ASIC on these matters,” it said in a statement to the Australian Securities Exchange.

The insurer announced in July 2022 that it was setting aside $US75 million ($112 million) in provisions for a remediation program.

Price discount failings have been a priority area for ASIC, which in October 2021 called on all general insurers to review their practices. It later wrote to 11 businesses asking them to undertake a comprehensive review and to “fix, repay and report” any issues around discount promises.

A regulator report in June last year said general insurers were repaying $815 million to more than 5.6 million customers for pricing failures reported since January 2018.

IAG was penalised $40 million last year after ASIC took Federal Court action over loyalty discounts for certain types of home insurance, including NRMA-branded cover. The company has said it will defend another ASIC action related to loyalty discounts on certain types of home cover provided through the SGIO, SGIC and RACV brands.

The regulator also initiated action against RACQ for pricing discount failures, resulting in a $10 million penalty.

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