FAI General Insurance - s.93AA undertaking

Summary of undertaking offered by FAI General Insurance Company Limited to the Australian Securities and Investments Commission (ASIC) given for the purposes of section 93AA.

The ACCC investigated FAI General Insurance Company Limited, in relation to potentially misleading representations 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 Commission was of the view that the insurance policy renewals were likely to mislead or deceive the public about the GST component of insurance premiums. The ACCC was satisfied that no FAI customer has been overcharged. FAI has contacted all affected policyholders apologising for the error.

An undertaking was received from FAI General Insurance Company Limited:

• to engage independent external consultants to conduct an audit of its processing and financial systems. The audit 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; and
• to commission a full independent audit of its consumer protection compliance program to ensure it meets the requirements of the applicable Australian Standard. 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, as well as such matters as unconscionable conduct and false or misleading statements in relation to the GST. Such of the latter conduct where it relates to financial services is governed by the provisions of the ASIC Act.

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, as well as such matters as unconscionable conduct and false or misleading statements in relation to the GST. Such of the latter conduct where it relates to financial services 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.