FAI provides court-enforceable undertakings over potentially misleading premium notices

FAI General Insurance Company Limited has provided the Australian Competition and Consumer Commission with a court-enforceable undertaking concerning potentially misleading claims on insurance policy renewals.

In October 1999 FAI issued a number of Compulsory Third Party certificates stating that a Goods and Services Tax liability existed when in fact there was no such liability.

In May and June 2000 FAI issued 185 insurance renewal notices where the apportionment of stamp duty and GST on the base premium was incorrect.

The ACCC is satisfied that no FAI customer has been overcharged. FAI has contacted all affected policyholders apologising for the error.

FAI has undertaken to engage independent external consultants to conduct an audit of its processing and financial systems. They will determine: why the incorrect GST liability was shown; the number of any additional affected policyholders; and what remedial action should be taken by the company to ensure the mistake does not recur.

In addition FAI has commissioned a full independent audit of its consumer protection compliance program to ensure it meets the requirements of the applicable Australian Standard.

"This issue highlights the need for all businesses to take extreme care in explaining price changes under the New Tax System", ACCC Chairman, Professor Allan Fels, said today. "The ACCC will continue to monitor the insurance sector to ensure that such mistakes are not repeated".

Background

This undertaking was made and accepted pursuant to section 93AA of the Australian Securities and Investment Commission Act 1989 (the ASIC Act) as opposed to section 87B of the Trade Practices Act 1974. The ACCC administers the prohibition on price exploitation in relation to the New Tax System. It also administers prohibitions on unconscionable conduct and false or misleading statements in relation to the GST. Where such conduct relates to financial services, it is governed by the provisions of the ASIC Act. ASIC has since November 1999 formally delegated consumer protection aspects of GST to the ACCC, through use of nominated ACCC officers as delegates.