RACQ makes $253 million provision for pricing remediation program
RACQ says it has “fully provisioned” for the expected cost of its ongoing pricing remediation program after the Federal Court last week penalised the motoring club’s insurance business for failing to deliver on premium discounts that had been promised to customers.
The $253 million provision, disclosed in RACQ’s 2022/2023 annual report, includes premium refunds, taxes, and interest, as well as the program costs and the $10 million penalty, the result of court proceedings launched by the Australian Securities and Investments Commission (ASIC).
RACQ says the provision is before allowance for expected recoveries of GST and duties.
“We currently anticipate the provision will be sufficient to cover the program. Over $54 million has been refunded to date and we expect total refunds by program completion will be up to $220 million,” a spokesperson for RACQ told insuranceNEWS.com.au.
RACQ has also posted an Adverse Publicity Notice on its website as ordered by the Federal Court.
“Approximately 458,746 customers missed out on a total of around $86,476,339 in discounts they should have received. Additional policies were also impacted from March 2015 to 23 February 2017,” the notice says.
“RACQ admitted that it had contravened laws prohibiting it from engaging in conduct liable to mislead the public as to the nature and the characteristics of a financial service. RACQ has apologised for its conduct.”
The Court had ruled RACQ Insurance sent out misleading product disclosure statements (PDSs) on at least five million occasions between March 2017 and March last year about the pricing discounts that were available for certain types of cover. The PDSs relate to Motor, Home, Caravan & Trailer and Unique Vehicle insurance policies.
It was found the PDSs were potentially misleading because the discounts were only applied by RACQ Insurance to the base insurance premium, not to additional premiums paid for certain optional extras such as Excess Free Windscreen, Hire Car and Increased Caravan Contents.
ASIC launched the court proceedings after RACQ Insurance self-identified and self-reported the matter to the corporate regulator.