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Biggest scandal you've never heard of: Sneaky insurance 'price walking' tactic costing millions of Aussies

Big Insurance has a lot of money and a lot of clout, but there's 3 things the government could do to save you right now.

Joel Gibson
Updated ·4-min read
Joel Gibson holding up two fingers with Australian dollar bills on the side.
Joel Gibson is calling on Australians to sign a petition to demand the government act on 'the biggest scandal you've never heard of'. (Joel Gibson)

If there’s a silver lining to this cost-of-living crisis, it’s this. When times are tough and voters get furious about price-gouging, governments are forced to make the changes they should have made years ago to protect consumers.

We’ve seen that happen in the past couple of years to energy companies. Federal and state governments capped some wholesale prices, increased some taxes on fossil fuel exporters and introduced over $3.5 billion in extra energy rebates - especially for concession card holders.

We’re seeing it happen now to supermarkets with a string of inquiries and reports that should produce some new protections - although what they’ll be and whether they’ll work remains to be seen.

And I think insurance companies are next. In fact, I think they’ve had it coming for some time.

Shares in Australia’s biggest insurance company IAG dropped 2.5 per cent on Wednesday when it was announced that they were facing a class action claiming they’d punished some of their most loyal customers with higher premium hikes. IAG denies it did this but the company is also defending the same allegation in a federal court case with the corporate regulator ASIC.

But this was just the latest bit of bad news for the insurance industry. They’ve been having a shocker for about a year now.

Struggling to cope with the fallout from years of major fires and floods, they’ve been caught out over-charging and hiking premiums by a record amount while also increasing their profitability.

Here’s the timeline:

  • June 2023: ASIC forces 11 insurers to refund $815 million in over-charged premiums to 5.6 million customers as a result of widespread pricing failures in the industry over the past decade or so.

  • June 2023: ASIC fines NRMA (owned by IAG) a record $40 million for jacking up the base premiums of customers before applying so-called “loyalty discounts” so that they wouldn’t drop too far.

  • August 2023: ASIC takes SGIO, SGIC and RACV (also owned by IAG) to court for the same practice, claiming they used a sophisticated computer algorithm that predicted who was least likely to switch and charged them extra.

  • February 2024: IAG announces its cash profit is up 86 per cent in a year. Suncorp announces net profit in the relevant division is up 534 per cent compared to 6 months ago. QBE announces its annual net profit in Australia and the region is up 131 per cent.

  • March 2024: The ABS reveals that insurance premiums have risen by an average 16 per cent in the past year, the fastest increase in 22 years.

It’s not pretty and customers are furious about the outrageous renewals they’re now getting. It doesn’t get the public attention that power prices and grocery prices attract.

But, I’m now getting far more correspondence about insurance prices on social media than I do about other bills - maybe even double the amount.

My TikTok account is just a sample size of one, of course, but insurance was also the second most complained-about product in a price-gouging report that former ACCC boss Allan Fels wrote recently.

Fels is the same person who looked into insurance pricing a decade ago, comparing 11 different brands and what they quoted for insurance on a hypothetical home and contents in various locations.

He found premiums sometimes differed by over $1000 and that the difference between prices for new customers and old, loyal customers differed by an average of 25 per cent and sometimes as much as 34 per cent.

The insurance industry has been a sacred cow (or maybe a sacred dinosaur!) for too long and its pricing practices are long overdue for a dose of sunlight and some consumer-friendly reforms.

That’s why I launched a petition to “Stop Home and Car Insurance companies from over-charging Australians”.

For that to happen, governments need to pull their fingers out and do these 3 things:

  1. Comprehensive comparison websites so we can easily compare prices: Many big insurers refuse to cooperate with these websites at present, unlike other industries such as energy, telco and banking.

  2. Ban 'price walking': This is the practice of charging older, loyal customers more each year despite no major change in their cover, which results in them paying as much as 34 per cent more than new customers. The UK banned this in 2022. Australia should do the same.

  3. Extend the Consumer Data Right to home and car insurance by January 2025: This is a technical solution that will make switching easier for insurance customers.

Big Insurance has a lot of money and a lot of clout in Canberra but surely the time has come for these huge businesses to join the rest of us in the 21st century.

Joel Gibson is the author of EASY MONEY and a regular guest on TODAY, 2GB, 4BC & ABC Radio. He posts daily about money to over 25,000 followers on TikTok & Instagram