Budget Direct faces lawsuit after allegedly overcharging customers through misleading discount policies

The Australian Securities & Investments Commission (ASIC) is pursuing legal action against Auto and General, under which the Budget Direct brand operates. From March 2020 to July 2024, Auto and General had promoted discounts for customers who purchased certain insurance policies online. However, according to the ASIC, around 39,000 customers lost access to these discount benefits after changing aspects of their policy within the first year. The lawsuit accuses the insurance company of misconduct in failing to inform the public and its customers of these conditions for the discount policies. 

The ASIC reports that the average premium discount loss to the customer base amounts to more than $3 million. Sarah Court, the deputy chair of ASIC said, “We allege Budget Direct removed discounts without notice if the customer made certain changes to their policy details, leaving tens of thousands of people out of pocket.” These discount policies were accompanied by advertising and promotional material which seemingly did not address these conditions or provide clarity to customers. ASIC further claimed that Auto and General were aware of the issue since 2016 and had not informed customers until much later. 

Auto and General has paid out around $3.8 million in compensation but the ASIC argues that the company’s misconduct demands more severe action such as a fine, stating that the insurance company took too long to resolve the issue or communicate with the affected customers. 

“We allege Budget Direct removed discounts without notice if the customer made certain changes to their policy details, leaving tens of thousands of people out of pocket.” – Sarah Court, Deputy Chair, ASIC

In response, Auto and General released a statement saying, “[…] since this issue commenced, there has been a significant program of transformation to improve our culture of accountability and compliance,” adding that they would improve their systems to avoid a repeat incident. 

ASIC has been monitoring misrepresentation of pricing among insurance agencies, raising similar issues in recent years with different insurance agencies. It is not yet announced whether Budget Direct will provide a defense for this case.