ASIC has launched a lawsuit against RACQ, one of Australia's major customer-owned institutions, alleging misleading conduct. 

The lawsuit is the latest action taken by the Australian Securities and Investments Commission (ASIC) against insurers following a review into how companies did not apply hundreds of millions of dollars in discounts. 

The pricing failures were described as an “industry-wide issue” by ASIC deputy chairwoman Sarah Court. 

RACQ had previously admitted that more than $200 million in insurance discounts had not been passed on to customers, but maintained that this was an error and not a purposeful attempt to deceive customers.

The action was filed in the Federal Court in Queensland. 

RACQ said in a statement on Friday that “ASIC is alleging [the] product disclosure statements for insurance policies were misleading in their description as to how insurance premiums were to be calculated, in contravention of the ASIC Act”, and that this related to how discounts would be applied to premiums with optional insurance covers.

The problem of failing to pass on discounts has affected other insurers as well, including Sydney-based insurer IAG, whose gross cost of the discount problem exceeded $500 million. 

IAG also faced civil litigation from ASIC and has admitted to engaging in misleading or deceptive conduct. Another insurer affected by discount breaches was Sydney-based QBE, which took a US$75 million (AU$110 million) charge over the issue.

Last year, RACQ was criticised by the Australian Prudential Regulation Authority (APRA) for its “immature” risk culture. 

The organisation's insurance arm has also been hit by wild weather in recent years and has since undergone a review of its structure. Options on the table have included a full sale, a joint venture, or bringing in major reinsurers as partners in a quota sharing arrangement.