The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against RACQ, alleging that the insurer sent out 570,000 misleading renewal notices. The notices reportedly failed to accurately compare new premiums with previous prices.

In its Federal Court filing, ASIC claims that the renewal notices sent to RACQ's insurance customers were false and misleading. The lawsuit follows a report detailing how the notices compared a new premium for the upcoming year against a "last period premium" that did not necessarily reflect what customers actually paid. This "last period premium" could omit discounts that were negotiated after the initial quote.

Court documents indicate that despite RACQ publicly stating that no clients had complained, the company had received complaints years earlier about the misleading nature of the renewal notices. The lawsuit alleges that staff were aware of the issue as early as 2019.

ASIC Deputy Chair Sarah Court emphasized the importance of the case, stating, "We know that people are struggling with the price of their insurance premiums. What this conduct … did was effectively mislead customers as to the price increases for their premiums."

One example highlighted by ASIC involved a customer named John Monks. His renewal notice indicated a "last period premium" of $6,930.55 and a new offer of $7,033.57, suggesting a 1.5% increase. However, Monks had actually paid only $5,024.18 the previous year after securing a discount, resulting in a true increase of 39.9%. Monks criticized RACQ's handling of the situation, calling it disgraceful and accusing the organization of being "extremely arrogant" in its dealings with loyal customers.

The lawsuit covers a period from September 2019 to December 2024 and includes various insurance products, such as home, boat, and pet insurance. RACQ has stated that it will cooperate with the regulator to resolve the lawsuit. The company has since clarified its renewal notices to reflect actual pricing changes and expressed disappointment over the situation.

RACQ reported that it had "self-reported" to ASIC after inquiries about the renewal notices. However, ASIC's lawsuit claims that prior to September 2019, several staff members were aware that the "last period premium" did not account for policy and price changes made after the original premium offer. Complaints about the misleading nature of the notices began to surface shortly after they were issued.

Despite RACQ's previous statements claiming no feedback about renewal communication issues, the company later acknowledged that it had identified historical complaints following an internal review.

This lawsuit is part of a broader trend of ASIC taking action against insurers, which have faced mixed outcomes in similar cases. The regulator has previously secured over $800 million in refunds for customers due to insurers not passing on discounts.

Court noted that issues within the insurance industry often fail to be escalated and addressed, calling it a "serious compliance failure." RACQ's insurance division has faced increasing scrutiny, with complaints rising over pricing and claims handling. Despite these challenges, the division reported a profit of $127 million last year, partly due to better investment returns and the release of previously held capital.

Recently, RACQ announced the sale of its insurance division to IAG, an ASX-listed insurance giant, in a deal valued at $1 billion. The outcome of the ASIC lawsuit and any potential penalties remain to be determined, but sources suggest that any penalties would likely fall on RACQ. The company previously paid a $10 million fine in 2023 for misleading customers about pricing discounts.