The Australian Securities and Investments Commission (ASIC) announced it was commencing proceedings against Auto & General Services Pty Ltd after 39,000 customers were alleged to have been overcharged for premiums over several years.
The customers lost a total of $3.3 million in savings between March 2020 and July 2024.
The regulator is seeking declarations and fines from the court.Â
Auto & General apologised to the affected customers in a statement, saying the insurer self-reported to ASIC.
The company has since invested more than $70 million to improve its systems and processes for managing compliance obligations to prevent a recurrence.
"We have worked openly and constructively with ASIC throughout its investigation," it said in the statement.
"It is too soon for us to indicate the next steps we will take in this process.
"Auto & General is committed to continuing to provide affordable, comprehensive and dependable insurance solutions to our loyal customers."
Affected customers received full compensation for the discount amount and interest.
The average refund, with interest, was $93.79.
ASIC alleges significant discounts of up to 30 per cent for Budget Direct customers who purchased car, home or motorbike insurance policies online were misleading.
This was because customers were not told the discounts would be removed if changes were made to their policies, such as a change of address, according to the regulator.
It is alleged Auto & General first became aware of the problem as early as 2016, but failed to inform affected customers.
Staff did not immediately try to fix the problem.
ASIC deputy chair Sarah Court said the case highlighted the importance of the regulator's prioritisation of enforcement on misleading pricing practices.
"There's an obligation under the law to self-report, and it is not satisfactory that things go on for years and years, impacting consumers, while these things are sorted out," she told reporters on Friday.
"Our message to the industry is simple: you are on notice. Insurers must make the discounts they offer clear, accurate, easy to understand, and importantly, be delivered on."
Auto & General has since paid more than $3.8 million in remediation, including interest, to the 39,000 customers impacted during the almost four-year period.
