RAA Insurance is to contact around 180,000 members to offer mostly small refunds in the next 12 months after a review found some may not have received premium discounts they were entitled to. 

The SA insurer has provisioned $25.56 million for the remediation program in its results for the year to June 30. Refunds will range from $20 to a few hundred dollars, depending on the number and length of policies and other factors. 

“RAA holds itself to an extremely high standard. In line with our values to do the right thing by our members, we will be refunding members including interest,” RAA CEO Nick Reade said. 

“In these cases, our pricing was consistent with our Product Disclosure Statements and the premiums charged were exactly as intended. However, our communication of how discounts applied could have been clearer in some of our marketing and promotional material.” 

The admission comes after the Australian Securities and Investments Commission (ASIC) launched proceedings against RACQ Insurance in February for allegedly misleading statements regarding pricing promises, and said in June said it had commenced other investigations into insurers involving suspected failures to deliver on discounts. 

IAG is fighting ASIC allegations it misled customers about loyalty discounts via Insurance Australia (IAL), SGIO and SGIC, and its RACV brand joint venture. 

ASIC is alleging IAL and IMA misled customers and that its pricing algorithm meant some more “loyal” customers may have been allocated higher premiums before promised discounts were applied. IAG denies the allegations.  

Separately, IAG was penalised $40 million in June for failing to honour discount promises made to NRMA branded policy customers. 

RAA says that prior to ASIC announcing its insurance industry-wide pricing promises review, it appointed an external expert to provide an independent assessment of its insurance pricing mechanisms and member discounts. The scope was subsequently expanded to include ASIC’s review.  

RAA says some wording in marketing material was found to be “inadequate in describing how discounts were applied to premiums”. As a result, there were instances where members may not have received the full premium discounts they were entitled to.  

“The marketing material has now been corrected and RAA Insurance self-reported a regulatory breach to ASIC,” the insurers said in its annual review today. 

"RAA Insurance is committed to comprehensively and efficiently addressing the remediation of these issues to impacted members. This will take some time, as the business works through the process and contacts those members who have been impacted.” 

The remediation program will be independently monitored by an external party in "an open and transparent approach to resolving the matters for our members”.

RAA’s revenue was $807 million in the year to June 30 2023, and it surpassed 805,000 members.  

However, extreme weather events including the Murray River flooding and November storms led to more than 81,000 claims, totalling a record $525 million.  

It posted a $53.9 million net loss for the financial year. 

“These weather events are occurring more often, with greater impact, and are the biggest driver of increasing insurance premiums,” said Mr Reade, who formerly headed the Department of the Premier and Cabinet at the SA Government.