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IAG sued for allegedly jacking up prices for loyal customers

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Slater & Gordon are alleging the insurance giant they used a computer algorithm to overcharge customers less likely to switch.

Aussie law firm Slater & Gordon have served up a spicy class action lawsuit to insurance giant IAG, alleging they used a computer algorithm to overcharge loyal customers.

Do they have a leg to stand on? Or is the rising price of insurance going to be enough to explain the jumps in prices over the last 6 years?

The lawyer's core claim is that IAG brands RACV, SGIO and SGIC were targeting loyal customers with unfair premium increases that wiped out any loyalty discounts that were applied.

Slater & Gordon's website states that customer's were kept in the dark about it.

"Our investigation suggests that IAL and IMA employed pricing strategies which raised the base premiums of customers that they considered less likely to switch to a different insurer," the lawyer's say online.

"Customers were not made aware that these hidden fee increases would reduce the impact of the loyalty discounts that they had been promised by insurers as a reward for their loyalty as customers.

"We consider that this conduct may amount to misleading and deceptive conduct and/or unconscionable conduct, in breach of the ASIC Act."

IAG refutes that allegation, saying on its website that it will defend the action:

"IAL and IMA maintain they have delivered on loyalty promises made to customers and do not agree that they have misled customers about the extent of the discounts they would receive.

"IAL and IMA intend to defend the proceedings commenced by Slater and Gordon."

Slater & Gordon allege that customers that held policies between 27 May 2018 and 27 May 2024 were affected.

3 brands accused with alleged misconduct, more to come?

IAG is one of the biggest insurers in the country, but Slater & Gordon have only targeted a few IAG brands with this action.

IAG also operate NRMA Insurance, CGU, WFI and ROLLiN' insurance, none of which are listed in the action. However, Slater & Gordon has said it is investigating NRMA.

That would be significant - the NRMA has over 2.8 million members across Australia.

Loyalty tax or genuine price rises?

It shouldn't be any great surprise that regularly comparing and switching financial products will save you money.

In my experience as a comparison expert, I've seen people save literally thousands by finding a new brand that offers the same cover for less money.

However, how much of that can be explained by predatory taxes on customers who are less likely to switch insurers is the the big unknown, and could be a tough one to prove in the current climate.

The price of most insurance types has gone up over the last few years. Part of that is simply inflation, but the impact of climate change has been especially significant on home insurance prices.

Car insurance has also been hit by the still inflated costs of car repair and replacement. This is thanks in part to the pandemic, and to increasing costs in global logistics, especially after Russia's invasion of Ukraine.

That doesn't necessarily mean IAG are scot-free, but it will be interesting to see how Slater & Gordon's allegation holds up under scrutiny.

Compare and save

Regardless of the reason, the advice for you is the same as always - don't get caught paying more for a product you can quickly and easily find for less.

Finder research from 2023 found around 2 in 3 Australians have paid some sort of price for letting a subscription auto-renew, or not shopping around for a cheaper product.

That's 13 million Aussies that could have been saving money by cancelling or switching a service they didn't need or could find cheaper elsewhere.

You're already on the Finder website anyway, so why not give it a try?

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