ASIC Commences Legal Action Against Auto & General Over Alleged Customer Overcharging

The Australian Securities and Investments Commission (ASIC) has commenced legal proceedings against Auto & General, the underwriter for Budget Direct, alleging that approximately 39,000 customers were overcharged and lost online discounts totaling over $3 million.

ASIC claims these discounts were removed without adequate notification when customers made amendments to their policies during the first year of cover.

Legal Proceedings and Allegations

ASIC's legal action primarily addresses alleged conduct between March 2020 and July 2024. During this period, the regulator claims customers experienced an average premium discount loss of approximately $100. ASIC alleges that online discounts were removed without clear notification when policyholders made changes to their insurance details, such as an address alteration, within their initial year of cover.

The regulator asserts that Auto & General's advertising was misleading, as customers were reportedly not adequately informed that such policy changes could result in the removal of their online discounts.

ASIC Deputy Chair Sarah Court stated that discounts were allegedly removed without notice, leading to financial detriment for customers.

ASIC is seeking further civil penalties from the court.

Company Awareness and Remediation Efforts

ASIC further alleges that Auto & General became aware of this issue as early as 2016 but did not inform affected customers for several years.

In response, Auto & General has confirmed that it self-reported the incident to ASIC and has since paid over $3.8 million in remediation to affected customers. A company spokesperson stated that all affected individuals have been fully compensated. The company also announced investments exceeding $70 million in system and process improvements aimed at enhancing risk and compliance management, alongside a program designed to improve its culture of accountability and compliance.

Broader Regulatory Context

Budget Direct provides insurance services to an estimated three million Australians. This legal action aligns with ASIC's ongoing regulatory focus, initiated in 2021, on addressing misleading pricing practices that affect the cost of living for consumers.

It is one of several recent actions taken by ASIC against insurance companies for alleged misconduct. These include cases against IAG in August last year concerning alleged misleading home insurance discounts and legal action against RACQ for allegedly issuing misleading insurance renewal documents with inaccurate comparison pricing.