QBE-owned Elders Insurance has repaid customers $5.3 million to rectify underpayments on motor vehicle insurance claims.

The insurer inadvertently underpaid on total loss claims for motor vehicles insured for market value.

Until the problem was recognised in September 2010, Elders’ motor vehicle policy covered the cost of stamp duty on the purchase of a replacement vehicle where the insured vehicle was a total loss.

Motor stamp duty varies between states, but on average is about 3% of the purchase price. However, Elders failed to include stamp duty when paying total loss market value claims.

Elders was alerted after the Financial Ombudsman Service resolved a case in August 2010.

The Australian Securities and Investments Commission (ASIC) says the underpayments date back “a number of years”, but after consultation with the regulator Elders has repaid the outstanding amounts, with interest, to most eligible customers.

So far 9307 customers have received nearly $5.3 million in payments, with Elders still working to contact about 350 former customers.

QBE would not comment on the matter to insuranceNEWS.com.au.

ASIC says in a statement that Elders has been co-operative in responding to the problem.