In our golden years, we hold on to the values we've cherished through the decades—trust, loyalty, and the belief that sticking with a company will earn us better service and even a better deal.

What happens when loyalty is exploited in exchange for profits?

This is the heart of a troubling issue involving the largest insurance company and a practice that will eventually affect millions of Australians.

Insurance Australia Group (IAG)—the largest general insurance company in Australia and New Zealand—has been hit by a class action lawsuit.

The lawsuit alleges that the insurance behemoth has been inflating premiums for its customers across Australia, a practice that could have affected millions.

The case centres around Kerry Reece, a Melbourne Storm fan whose loyalty is reflected in her decades-long commitment to her insurance provider.

IAG customers filed a class action lawsuit following allegations of an algorithm-based inflation of their insurance premiums. Image Credit: IAG

Kerry believed that her company loyalty would be reciprocated.

Instead, she found herself having to cut back on life's little pleasures as her insurance premiums rose, despite her 'gold membership' status, which promised discounts and savings.

The lawsuit alleges that IAG used a computer-generated algorithm to implement a 'loyalty uplift', systematically increasing premiums for customers deemed less likely to switch providers, regardless of their actual risk profile or insurance cost.

While some customers thought they were receiving discounts for their loyalty, the base premium has been hiked up, rendering discounts meaningless.

If proven true, this practice is not just a breach of trust—it's a breach of the industry code and a misuse of a dominant market position.

The implications of this case are significant. If guilty, IAG will be required to compensate millions of customers.

The situation raised questions about the ethics of customer loyalty programs and the transparency of insurance pricing.

The Australian Securities and Investments Commission (ASIC) also assessed the situation as they sued IAG over similar allegations involving the loyalty discounts provided to home insurance customers.

While IAG denied the allegations and defended themselves in both cases, the regulator's increased scrutiny of insurer conduct is a positive sign for consumer protection.

This case is a critical reminder to review your insurance policies regularly and not to take loyalty discounts at face value.

It's essential to compare offers and ensure that your premiums are fair and reflect the coverage you're receiving.

As the class action against IAG unfolds, many will be watching closely—including Kerry Reece, who remains insured with RACV but is now questioning her loyalty towards the insurance provider.

It's a cautionary tale for all of us to stay informed and vigilant and ensure that the companies we trust are truly acting in our best interests.

Remember, loyalty should be a two-way street, and your insurer's commitment to you should be as strong as yours is to them.

Key Takeaways

• Insurance Australia Group (IAG) is facing a class action lawsuit for allegedly using a computer algorithm to inflate premiums for customers, known as 'loyalty uplift.'
• The class action suggested that IAG misled customers about discounts and may not have received cheaper insurance.
• The lawsuit includes allegations of misleading and deceptive conduct.
• Despite the accusations, IAG has denied them, stating that they have delivered on loyalty promises and are dedicated to providing the best service for their customers.

Have you encountered unexpected premium hikes that made you question the value of your policy? Join the conversation and share your opinions in the comments section below.

 

[GranniCaz]

97 year old man had been loyal, sending off cheques without question to his historic “rural” insurance company; only to delve into the valuations and find that his house was OVER valued by 40+% and his contents overvalued ( not by him either !!) by 324%!!!!! company pushed back, pretty much questioning his cognitive issues. eventually, after family intervention, “agreed” with values

 

[Luckyus]

Arseholes, are worse than a robber's dog.

 

[Fairy Wren]

Loyalty is a swear word to the corporate world.
I am concerned that insurance companies now rate house insurance by postcode rather than street address. Flooding in the valleys now increases premiums for all in the postcode. My insurer told me it was council’s fault for claiming a natural disaster.

 

[mylittletibbies]

Despite living in an area where we have had no floods or bushfires and not having made a claim my house and contents insurance increased by 50%
I got a quote from four other companies but they were all in the same ball park.
They are a law unto themselves
If this keeps happening only the wealthy will be able to afford insurance.

 

[Mr Chips]

Loyalty is a swear word to the corporate world.
I am concerned that insurance companies now rate house insurance by postcode rather than street address. Flooding in the valleys now increases premiums for all in the postcode. My insurer told me it was council’s fault for claiming a natural disaster.

Many years ago I used to sell insurance products to car buyers and of course, I got to know how the companies worked from an insider's point of view. One of the ways that insurers would formulate a premium was by the "Risk Assessment" method. So they would look at a postcode and see how many claims had been made in that postcode and compare the risk with other postcodes. So a Northern leafy peaceful suburb of Sydney compared to a normal average suburb would generally pay more for motor vehicle insurance than the normal suburb.
Why?
Because accidents in the leafy green suburb would most likely be between a Ferrari and a Mercedes Benze whereas in a normal suburb, it would be between a five-year-old Ford Falcon and a six-year-old Holden Commodore so the claims were much lower, I believe this is still the case. So it was a case where the wealthy paid more.

 

[Greg350]

This has been going on for decades, don't people shop around for insurance? There is no loyalty with insurance companies, staying with the same one for years means nothing, you will still get paid or not get paid on a claim exactly the same.

I ALWAYS shop around each year, prices range enormously, particularly for car insurance. When I renewed in April I had quotes ranging from $800 to $3,200, same type of cover, same conditions, you must shop around.

I actually stayed with my current insurer this time as their quote was the best again, but I have had renewals that may quote say $1,000, go online as a new customer and it comes out as $850. So call them and they will bring the price down to the $850. NRMA is good at this, same with GIO.

 

[crosshill49]

I have been with IAG -NMRA for 40 years and the premiums have increased dramatically, on on one of my recent policies, I advised the consultant that i was going to shop around and they immediately took $100 of the policy. I will be definitely shopping around on all my policies from now on and I have 11 policies with this company

 

[Rik]

The hikes in IAG insurance for vehicles and combined house and contents is outrageous. Supposed heaps of loyalty bonuses. What a joke. This year the worst rises. 57 years a member looking elsewhere.

 

[Singomate]

Yes with Toyota insurance, that's why I shifted to Shannon's way better value.

 

[Josef]

This has been going on for decades, don't people shop around for insurance? There is no loyalty with insurance companies, staying with the same one for years means nothing, you will still get paid or not get paid on a claim exactly the same.

I ALWAYS shop around each year, prices range enormously, particularly for car insurance. When I renewed in April I had quotes ranging from $800 to $3,200, same type of cover, same conditions, you must shop around.

I actually stayed with my current insurer this time as their quote was the best again, but I have had renewals that may quote say $1,000, go online as a new customer and it comes out as $850. So call them and they will bring the price down to the $850. NRMA is good at this, same with GIO.

Then pray to God that you never need them, because then you will see that these two are among the biggest crooks.

 

[Singomate]

Then pray to God that you never need them, because then you will see that these two are among the biggest crooks.

Have
Used already had first class service with Shannon's, first class work on car, buy very good quality auto trades people

 

[Staffordshire Whippet]

Don't get too excited about the lawsuit. It's a class action mounted by Slater & Gordon; they haven't exactly been setting the world alight for quite a while now. (Is that a bad analogy to use in regard to Insurance?)

 

[JenWill]

I have each time my renewal came I questioned why it went up and at times it was like a $10 increase and the car is a 2001 Toyota Echo market value is perhaps $1500

 

[Jenniw]

Not to mention Telcos! All their lovely offers to new customers only. It’s awful out there. One of them actually said to me to leave them for a while then come back as a new customer!

 

[Phillip Giunta]

Yes, I get price up hikes. When I phone to ask why? especially when I've made No Claim for more than 10 years. I get mostly Excuses! When I went to make a claim, some years ago. The Excess was higher than the cost of the job.

 

[Josef]

I have been with IAG -NMRA for 40 years and the premiums have increased dramatically, on on one of my recent policies, I advised the consultant that i was going to shop around and they immediately took $100 of the policy. I will be definitely shopping around on all my policies from now on and I have 11 policies with this company

Check your policy, they have cut or deleted parts for the insurance.

 

[Phillip Giunta]

Check your policy, they have cut or deleted parts for the insurance.

Yes, I'm in the same boat. I informed the consultant; I would be looking elsewhere. And in no time got a reduction. I'll be doing the same, when another policy is due.

 

[The Crowlster]

I have had funeral insurance with IAG for $17 years and despite having contributed more than the final payout figure, when I turned 75, the premiums went from $90 per month to $190 per month. When I enquired as to why the huge jump in the payments I was told that this is how the policy runs. I’ve put nearly $20000 into the policy now ($15000 payout) so I don’t know what to do about it. I can’t really afford this on my pension but I don’t want to lose all the money I’ve put in.

 

[mylittletibbies]

I have had funeral insurance with IAG for $17 years and despite having contributed more than the final payout figure, when I turned 75, the premiums went from $90 per month to $190 per month. When I enquired as to why the huge jump in the payments I was told that this is how the policy runs. I’ve put nearly $20000 into the policy now ($15000 payout) so I don’t know what to do about it. I can’t really afford this on my pension but I don’t want to lose all the money I’ve put in.

You can lodge a complaint with the AFCA (Australian Financial Complaints Authority,) they handle complaints about insurance companies.
You can either ring them or log into their website and fill in a complaints form.
Good luck, I hope they can do something for you.