AA Insurance was fined $6.1 million following failures to properly apply discounts on multi-policy annual premiums and failing to honour promises of discounts for AA members and legacy ‘lifetime’ policy holders. This penalty is on top of $16 million compensation AA Insurance paid directly to affected customers
AA Insurance self-reported its breaches to the Financial Markets Authority after a routine 2018 audit identified deficiencies in company recordkeeping. Checking to see that Automobile Association members were getting their promised discount, the auditor found AA Insurance could not conjure up a complete list of AA Automobile Association membership.
An expansive audit followed.
AA Insurance said this failure to allow required discounts lay with customers not self-declaring their entitlements when taking out insurance, AA Insurance staff not correctly entering required data and errors in software programmes creating invoices.
AA Insurance admitted breaches of the Financial Markets Conduct Act; prices offered for insurance cover were less than that charged.
The High Court was told AA Insurance overcharged customers by $11.1 million for policy years dating back to 2015. An extra $4.5 million compensation was paid to affected customers as ‘use of money’ interest. This included some $883,000 AA Insurance paid to charities in respect of bilked customers who could not be located or did not respond.
In addition, $420,000 was paid to those customers promised a guaranteed no-claims discount for life which was not honoured.
Justice O’Gorman ruled AA Insurance pay a $6.175 million penalty for breaches of the Act. Counting in its favour was timely self-reporting of these breaches, compensation paid to policy holders and the level of co-operation with FMA.
Financial Markets Authority is a direct beneficiary of the fine levied. First deduction from the $6.1 million is FMA’s full costs.
Financial Markets Authority v. AA Insurance Ltd – High Court (3.10.24)
25.004