RACQ Insurance, a wholly owned subsidiary of The Royal Automobile Club of Queensland Limited, has been hit with a hefty $10 million fine by the Federal Court.

The penalty comes as a result of potentially misleading customers about pricing discounts in its product disclosure statements (PDS). The Court found RACQ disseminated misleading PDSs on at least 5 million occasions between March 2017 and March 2022.

Approximately 458,746 customers were impacted, missing out on an estimated $86,476,339 in discounts they were entitled to. The PDSs for RACQ’s Motor, Home, Caravan & Trailer and Unique Vehicle insurance policies included statements that certain discounts would be applied to customers’ insurance premiums. However, these statements were deemed potentially misleading as the discounts were only applied to the base insurance premium, not to additional premiums paid for certain optional extras.

"Consumers need to be able to rely on the pricing promises made to them by insurers, and insurers need to make sure that they pass on those promises in full," ASIC Deputy Chair Sarah Court stated. "ASIC identified pricing promises in insurance as an enforcement priority this year, and will continue to monitor marketing and pricing practices in the industry, and use the full range of regulatory tools available to protect consumers from general insurers failing to honour promised discounts."

RACQ admitted to the contraventions and jointly submitted the penalty sought by ASIC was appropriate. In addition to the fine, RACQ was also ordered to pay ASIC’s costs of the proceedings. The affected optional benefits included Excess Free Windscreen, Hire Car, No Claim Discount Protection, Increased Caravan Contents, Pet, Mobile Phone, Small Business Contents and Items Away From Home; as well as the additional premium charged by RACQ for household insurance purchased for unoccupied properties.

RACQ, which offers a range of general insurance products including Household, Motor Vehicle, Caravan & Trailer and Unique Vehicle Insurance, is ranked 8th and 10th in Australia by gross premium written for Motor Vehicle and Home Insurance respectively. The company is a mutual organisation owned by its nearly 1.8 million members.

This case serves as a stark reminder for insurance companies to uphold their pricing promises and ensure that their customers are not misled by the terms and conditions of their policies.