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IAG could face financial penalties after ASIC action

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The Australian Securities and Investments Commission (ASIC) has asked the Federal Court to impose monetary penalties against IAG over alleged breaches of financial laws.

ASIC says subsidiary Insurance Australia Ltd (IAL) engaged in misleading or deceptive conduct and made false or misleading representations by stating some NRMA Insurance customers were eligible for certain discounts on home and motor policy renewals, but then not applying the savings.

A process of inflating some renewal gross insurance premiums led to affected customers failing to receive promised discounts totalling around $60 million, the regulator says.

The practice impacted renewals between March 2014 and November 2019 and affected at least 596,000 customers, in respect of 705,000 separate policies, according to ASIC.

New penalty provisions introduced after the Hayne royal commission allow ASIC to pursue harsher penalties for breaches of the Corporations Act and the ASIC Act.

The regulator is seeking pecuniary penalties “as the court deems to be appropriate” and requests that IAG has to publish a notice stating that it has been ordered to pay a penalty because it has made false or misleading representations.

The insurer says it self-reported the issue to the regulator in 2019 and has been providing refunds through a remediation program, with more than 80% of affected customers now compensated.

“IAG apologises for this failure, recognises the significance and that this was unacceptable, and is putting this right for its customers as soon as possible,” the company said.

“Since late 2019, IAG has enhanced its systems and processes for the delivery of discounts, as part of its significantly improved risk culture and control environment.”

ASIC says a number of insurers have been required to remediate customers for breaches in recent years and firms must ensure IT systems are updated and make improvements across compliance, governance and culture.

“Where there are failures, or empty promises about price discounts, ASIC will use the full range of regulatory tools available to protect consumers - including enforcement action,” ASIC Deputy Chairman Sarah Court said.