The High Court has imposed a near $6.2 million penalty on the insurer for failing to apply multi-policy and membership discounts, as well as guaranteed no-claims bonuses.
The Financial Markets Authority (FMA), which took action against the insurer, said the breaches primarily arose out of poor systems and processes.
The High Court ruled that between 2015 and 2020, AA misled customers about its multi-policy discount offer and misrepresented that certain eligible customers would receive its guaranteed no-claims bonus for life.
“While [AAI’s] marketing material represented existing policyholders who added another policy would receive the discount immediately, AAI’s systems were set up to apply the discount only once the original policy was up for renewal,” the FMA said.
The court found the failure to apply multi-policy discounts affected 112,463 customers, who were overcharged a total of $4.89m.
The failure to apply a discount to AA members affected 90,129 customers, who were overcharged $2.95m.
The court also found AAI overcharged 17,973 eligible customers $3.28m after it failed to apply its guaranteed no-claims bonus benefit on its comprehensive car insurance policies.
“AAI misrepresented that eligible customers would receive its guaranteed no claims bonus ‘for life’,” the FMA said.
“Until December 2011, AAI offered the bonus for each customer’s lifetime, providing the customer remained insured with AAI. After that date, the benefit was amended so that the bonus was applicable to the life of each customer’s policy only.”
However, it said some of AAI’s marketing continued to use the “for life” language.
For breaching financial markets law, Justice Laura O’Gorman imposed a pecuniary penalty with a starting point of $9.5m, a discount of 35% and a final penalty of $6.175m.
“Customers are entitled to feel secure that insurance premiums will be charged, and discounts applied, in accordance with policy terms and as represented in marketing material,” the judge said in her decision.
“Customers cannot be expected to double-check the precise details of transactions. They are entitled to trust the accuracy of their insurer’s systems and processes.”
