A life insurer failed to provide promised discounts to policyholders for more than a year and discovered the error only after an “ad hoc” review of its internal processes.

The error breached the industry code of practice, which requires insurers to ensure advertising is clear and not misleading, and that any price referred to is consistent with what the target audience will probably pay.

“This case highlights the critical need for insurers to test and review the implementation of new pricing features to ensure they apply advertised benefits correctly,” a Life Code Compliance Committee determination says.

“Failing to do so can result in financial detriment to customers and damage the trust between insurers and their customers, particularly when errors remain undetected for extended periods.

“In this instance, the error persisted for more than a year, affecting thousands of customers, and was only identified through an ad hoc review.” 

More than 4000 customers were overcharged on their annual premiums by an average of $8, the determination says.

They received a discount of 2% instead of the advertised 2.5%. The insurer says it plans to refund the 0.5% difference and send an apology letter explaining the error.

The insurer has also fixed its system to ensure it applies the discount as advertised.

Insurers are not named in determinations relating to code breaches.

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