“Loyalty tax” under the spotlight: Slater and Gordon announces class action investigation into pricing misconduct at Suncorp Group

Leading law firm Slater and Gordon has today announced that it is investigating a potential class action against AAI Limited/Suncorp Group Limited, on behalf of millions of home and auto insurance policyholders who may have been misled about the way their insurance premiums were calculated, potentially leading to customers paying a “loyalty tax”.

AAI is a part of the Suncorp Group – one of Australia’s largest insurance companies and a major Queensland brand – and issues insurance policies under household-name brands such as AAMI, Apia, GIO and Suncorp Insurance. Millions of Australians have their home or car insurance under one or more of these brands.

Publicly available information suggests that AAI/Suncorp Group may have been engaging in undisclosed “price optimisation”, which means adjusting customers’ premiums based on a customer’s likelihood of changing insurers, rather than just on the risk of providing insurance to them.

If this is proven then loyal, long-term customers are likely to have been charged more than newer customers, functioning as a “loyalty tax” built into customers’ premiums without their knowledge.

Slater and Gordon Class Actions Practice Group Leader Ben Hardwick said this kind of pricing had been banned in the UK and approximately 20 US states.

If AAI has been using price optimisation, then that is something that needed to be clearly disclosed to customers,

Mr Hardwick said

In February, consumer advocacy group Choice found that some home insurance premiums had risen by around 30% on the previous year, with over a third of insurers surveyed raising premiums above the 16% average.

“People deserve to know why their premiums have been going through the roof, especially if the main reason for this is a computer algorithm flagging them as a loyal customer who’s less likely to leave if prices go up.

We believe that there may be millions of Australians who assumed they were receiving a fair deal by remaining loyal AAMI, Apia, GIO and Suncorp customers, but were actually being secretly charged more and more for that loyalty each year. This is also likely to mean that the loyalty discounts some customers were receiving were actually worth a lot less than they thought.

“This kind of behaviour is unacceptable, especially in the middle of a cost-of-living crisis, and with climate related weather events impacting insurance premiums in many parts of the country.

“While premiums are going up, Suncorp Group has just reported a net profit of $1.8 billion for the 2024/2025 financial year – a 52 per cent increase on the year before. That money belongs in the pockets of everyday Australians, not on corporate balance sheets.”

The investigation comes off the back of Slater and Gordon’s class actions on behalf of RACV, NRMA, SGIO and SGIC customers against IAG subsidiaries IAL and IMA for similar conduct.