Slater and Gordon has filed a class action on behalf of millions of customers related to the pricing of NRMA home and/or contents insurance policies issued by Insurance Australia Limited (IAL), as part of the ‘Get your Insurance Back’ campaign.
The statement of claim, filed in the Victorian Supreme Court, accuses IAL, under parent company Insurance Australia Group, of engaging in misleading and deceptive conduct as well as unconscionable conduct by informing customers they were receiving loyalty discounts at the time of renewal, but not informing them that those discounts could be offset by a ‘loyalty tax’ which IAL had built into the customer’s base premium.
Slater and Gordon Class Actions Practice Group Leader Ben Hardwick said a pricing algorithm was used by the insurers to identify which consumers were least likely to switch to a different insurer in response to price increases in their premiums.
The algorithm then increased the base premium of those consumers who they determined were least likely to switch.
“We’re alleging that millions of Australians paid premiums year-on-year for NRMA home insurance on the promise that they were getting a discount. But in reality, because of this pricing algorithm, long-term customers were unknowingly paying extra in the form of higher base premiums.
“Customers are sick of being taken advantage of by big businesses and insurers, so through this group proceedings, consumers are demanding to be compensated for the loss and damages we say they have suffered as a result of IAL’s conduct.
“This class action alleges that these customers were denied all relevant information they should have had access to before they renewed their home and contents policies so they could have made an informed choice about whether to shop around for a better deal, or at the very least ask for a better price.
“The reality is that they are likely to have received cheaper insurance from these brands had their loyalty not been a factor in their renewal calculations at all.
“We consider that this conduct may amount to misleading and deceptive conduct and unconscionable conduct, in breach of the ASIC Act,” Mr Hardwick said.
The higher the computer program identified a customer’s perceived price elasticity, the lower the annual premium increases the customer would receive. This meant loyal customers, who were assessed as having low price elasticity and were unlikely to leave, faced steeper increases to their premiums.
Case study
John S saw significant increases in the last two years, with a 58% jump from 2023-2024 alone.
“I thought, that can’t be right. So, I went with NRMA online to check under a different name, everything else was the same except my name, and the same policy was up to $4000 cheaper.”
“I checked with other companies as well and none of them came close to the expensive quote I got from NRMA.”
“When I rang them up to enquire why my bill had jumped by 58% they said we can offer you an extra 100 dollar discount,” he said.
John first took out his insurance policy in 1989. His loyalty discount was listed as being 22.5% but he alleges there was no evidence of this in the figures quoted.
“I felt annoyed when I realised that they were actually trying to rip us off. Being a part of this class action feels like the only way, we as a community can affect change. They’ve obviously tried it on, so I think it’s important that all of us do something about this, and as a group we can tell NRMA that they can’t get away with this,” John said.
“Home and contents insurance is among the biggest household expenses that everyday Australians face each year, so to learn that these insurers have allegedly been taking advantage of loyal customers in such a way, we say, is unlawful,” Mr Hardwick said.
“This class action is seeking compensation for affected customers for the losses and damage they have suffered as a result of IAL’s conduct.”
“These legal proceedings should put all insurance companies on notice that this kind of misleading, deceptive and unconscionable conduct will be acted upon by consumers,” Mr Hardwick said.
The class action has been issued on a No Win-No Fee basis and group members will not be exposed to any out-of-pocket costs as a result of their participation in the claim. Slater and Gordon intends to apply, at the appropriate time, for a group costs order.
Contact details:
Austin Ceravolo 0437 801 093
austin.ceravolo@slatergordon.com.au
Cassandra-Elli Yiannacou 0401 322 593
cassandra.yiannacou@slatergordon.com.au
