Insurance Australia Group (IAG) is under scrutiny for allegedly manipulating insurance premiums, targeting long-standing customers who expected loyalty to be rewarded. A class action lawsuit, brought forward by the law firm Slater and Gordon, exposes a practice that purportedly punishes the trust of policyholders across Australia.

The lawsuit accuses IAG of employing sophisticated algorithms to inflate premiums for customers deemed likely to remain with the company—those who exhibit strong loyalty. This strategy, referred to as “loyalty uplift,” allegedly allowed IAG to increase prices for these customers disproportionately while offering comparatively modest hikes to those perceived as more likely to leave.

Ben Hardwick, a representative from Slater and Gordon, expressed concern that millions of policyholders might have been misled by this practice. He stated, “These customers were ostensibly given discounts for their loyalty, but in reality, those discounts were hollow. The company was inflating the base premium before applying the discount, rendering it virtually worthless.”

IAG, recognized as the largest general insurance provider in Australia and New Zealand, boasts brands such as NRMA and CGU. In the previous financial year, the company reported insurance profits exceeding 800 million Australian dollars, a staggering increase of nearly 40%. Yet, while IAG’s financial success continues to climb, the current lawsuit suggests that this growth may have come at the expense of trust and transparency with loyal customers.

The legal complaint alleges that from 2018 to 2024, IAG misled policyholders in various Australian states, including Victoria, Western Australia, and South Australia, regarding their home and contents insurance policies.

The lawsuit implicates several insurance brands under IAG’s umbrella, notably the RACV, the State Government Insurance Office (SGIO) in Western Australia, and the State Government Insurance Commission (SGIC) in South Australia. The complaint includes two subsidiary companies: Insurance Australia Limited and Insurance Manufacturers of Australia, the latter of which is predominantly owned by IAG. Customers of these brands are expected to be informed if they qualify for participation in the class action as the case progresses.

Slater and Gordon aim to demonstrate that customers were misled about the pricing of their insurance, suggesting that many individuals may not have been receiving the cost-effective coverage they believed they were. Mr. Hardwick indicated that eligible policyholders might be entitled to compensation exceeding 1,000 Australian dollars each.

Adding to IAG’s challenges, the Australian Securities and Investments Commission (ASIC) has also initiated legal proceedings against the company, alleging similar misconduct in relation to loyalty discounts offered to home insurance customers.

In response, IAG has denied all allegations and is actively defending itself against both the class action and ASIC’s claims.