A class action filed in the Victorian Supreme Court accused NRMA Insurance parent Insurance Australia Group (IAG) of engaging in "misleading, deceptive and unconscionable conduct" by bumping up base premium prices for long-term customers.
The Slater and Gordon-run suit alleged an algorithm used by the company - Australia's biggest general insurer - was responsible for identifying the most loyal home and contents insurance customers who were the least likely to switch insurers if the price went up.
Loyal NRMA customers paid inflated home insurance premiums believing they were getting a discount. (Darren England/AAP PHOTOS)
They were then allegedly hit with large increases to their base premiums, which more than made up for any purported discounts they were being offered as returning customers.
The "loyalty tax" cost some customers thousands of dollars, the law firm said.
"We're alleging that millions of Australians paid premiums year-on-year for NRMA home insurance on the promise that they were getting a discount," class actions group leader Ben Hardwick said on Tuesday.
"But in reality, because of this pricing algorithm, long-term customers were unknowingly paying extra in the form of higher base premiums."
Ben Hardwick says NRMA customers unknowingly paid extra for being loyal to the trusted brand. (Joel Carrett/AAP PHOTOS)
In May, the publicly listed IAG was hit with an almost-identical Slater and Gordon lawsuit over policies sold under other insurance brands, including RACV.
The law firm alleged customers were told they received discounts based on how many years they stayed with the insurer or the number of policies they held but might have been paying a higher base premium in the first place.
IAG said its subsidiaries, which were named as defendants in the two class actions, "maintain they have delivered on loyalty offers made to customers and do not agree that they have misled customers about the extent of the discounts they would receive".
The company, which has a market value of about $20 billion, is also defending related proceedings launched by the Australian Securities and Investments Commission in the Federal Court.
Slater and Gordon is running the class action on a no win, no fee basis.
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