Reading the fine print is always advisable whenever a contract is being signed. It can save a lot of money and potentially years of legal trouble down the line in some instances.
While it’s usually the consumer who ends up with the short end of the stick when it comes to terms and conditions, however, in a rare instance of the shoe being on the other foot, one of Australia’s largest insurance providers is in trouble for not reading their own documents.
The Royal Automobile Club of Queensland (RACQ) has been fined $10 million by the Australian Securities and Investment Commision (ASIC). The fine stems from misleading customers in its product disclosure statements (PDS) about the discounts available for certain types of insurance coverage.
The Federal Court found at least 5 million misleading PDSs were sent out between March 2017 and March 2022. According to ASIC, approximately 458,746 customers missed out on approximately $86,476,339 in discounts they should have received.
The PDSs for RACQ’s Motor, Home, Caravan & Trailer and Unique Vehicle insurance policies included statements that certain discounts would be applied to the customer’s insurance premiums. These statements were misleading as the discounts were only applied by RACQ to the base insurance premium but not to additional premiums paid for certain optional extras.
The statements did not specify that this was the case. RACQ admitted that they were at fault for not specifying and the company agreed with ASIC that the fine was appropriate.
“RACQ had no intention to mislead, it recognises and admits the historical controls it had in place to ensure its PDSs complied with the laws were inadequate,” the company said in a recent statement.
It was found that the wording of the PDSs was not deliberate on RACQ’s part. The wording of the PDSs was inherited from a since-disbanded joint venture with Suncorp.
However, because they overlooked an integral element of their own insurance policies, RACQ has been ordered to refund their customers. They have processed $54 million in refunds so far and will continue to refund customers well into 2024.
Speaking to the Australian Financial Review, RACQ chief executive David Carter was apologetic about the error.
“We got it wrong,” he said to reporters outside court after the decision was handed down.
“The change to remediate the [disclosure statements] was literally adding a sentence or two.”
He then proceeded to say that it was worthwhile reducing the length of PDSs in order to avoid confusion for both the provider and the customer. RACQ has also had to pay ASIC’s legal costs for the proceedings due to their error.
Proof once again that it helps to double check!