The Royal Automobile Club of Queensland (RACQ) has issued an apology to its members following issues with insurance renewal notices that have led to a potential multimillion-dollar lawsuit. The problems have drawn the attention of regulators, yet the organization admits that questions remain about the root cause of the errors.
“To you, and all our members — I’m sorry. This matter is certainly not in line with our high standards or the experience we strive to offer,” RACQ Chief Executive David Carter stated during the annual general meeting held on Tuesday.
RACQ, one of Queensland’s largest customer-owned organizations with nearly 1.7 million members, provides a range of services, including insurance and roadside assistance. The apology follows a Federal Court lawsuit initiated by the Australian Securities and Insurance Commission (ASIC) in September. The lawsuit alleges that over half a million renewal notices were misleading or false due to improper price comparisons between old and new premiums.
ASIC’s Legal Action and Underlying Issues
The lawsuit was triggered by an investigation conducted by the ABC into RACQ’s insurance division. The investigation revealed that renewal letters compared a new premium for the upcoming year against a “last period premium,” which did not necessarily reflect what a client had paid the previous year. This discrepancy often arose because the “last period premium” might exclude discounts agreed upon after the initial quote.
In one instance, a renewal notice suggested a customer’s previous period premium was $6,930.55, with a new offer of $7,033.57 — a 1.5% increase. However, the customer had actually paid only $5,024.18 after negotiating a discount, resulting in a real increase of 39.9%.
RACQ’s Response and System Improvements
During the meeting, Mr. Carter acknowledged that the limitations of the comparison price should have been clearly explained in the renewal notices. In response, RACQ has updated its systems and the format of its renewal notices. The organization is also committed to collaborating with ASIC to resolve the ongoing court case.
Mr. Carter refrained from providing specifics regarding potential damages but confirmed that any penalties would be absorbed by the company and not covered by commercial insurance. Recently, RACQ sold a significant portion of its insurance business to industry giant IAG for nearly $950 million.
This is not the first time RACQ has faced scrutiny. Previously, the company was fined $10 million in a separate ASIC case involving misleading conduct related to discounts. Similarly, IAG faced a $40 million penalty in a related case.
Historical Context and Internal Challenges
The issues surrounding the renewal notices have caused concern among former RACQ executives, some of whom have spoken to the ABC. ASIC’s latest case claims that when RACQ introduced price comparison figures in 2019, several staff members were aware of the issues, and customers began to complain almost immediately. One complaint reportedly reached a senior RACQ executive but was not addressed by internal committees until November last year, following inquiries from the ABC.
Mr. Carter admitted on Tuesday that the feedback from complaints had been escalated to a senior level years earlier. “What we can’t identify is what happened with the information. So what we can’t see is what decision got made with the escalation,” he explained.
Looking Forward: Ensuring Accountability
When questioned about how RACQ plans to prevent similar issues in the future, Mr. Carter emphasized that the organization is transforming its internal risk processes to enhance capability and culture. “When things get raised, someone takes action,” he asserted, highlighting that technological improvements will also play a role in identifying patterns and addressing complaints effectively.
The announcement comes at a time when the insurance industry is under increased scrutiny for transparency and consumer protection. As RACQ navigates this legal challenge, the outcome could set a precedent for how insurance companies handle renewal notices and customer communications moving forward.
