Here’s why the IAG (ASX: IAG) share price is down 3% on Friday

IAG shares are in the red after ASIC announced it’s taking the company to court
The post Here’s why the IAG (ASX: IAG) share price is down 3% on Friday appeared first on The Motley Fool Australia. –

The Insurance Australia Group Ltd (ASX: IAG) share price is sliding on Friday after the Australian Securities and Investments Commission (ASIC) launched a Federal Court case against the company’s subsidiary.

ASIC alleges IAG’s subsidiary, Insurance Australia Limited, failed to honour discounts promised to some NRMA policyholders between March 2014 and November 2019.

The watchdog is arguing IAG misled customers by increasing insurance premiums while applying discounts for customer loyalty and ‘no claim bonuses’. Thus, some NRMA customers didn’t receive the full benefit of advertised discounts.

The news of legal action has seemingly sent the insurance provider’s stock plummeting today. At the time of writing, the IAG share price is $4.92, 3.05% lower than its previous close.

Let’s take a closer look at the case ASIC has brought against IAG.

What’s the court case about?

The IAG share price is slipping as ASIC takes the company to court, claiming it withheld more than $60 million of discounts from some of its customers.

The corporate watchdog alleges Insurance Australia Limited’s conduct was deceptive and misleading. The Federal Court will be determining if such behaviour contravened the ASIC Act and the Corporations Act.

According to ASIC, at least 596,000 NRMA home, motor, caravan, and boat Insurance customers were affected by the practice.

In a release to the ASX, IAG stated it reported itself to ASIC when an internal review found the behaviour in 2019.

It’s working closely with ASIC to undergo a remediation program. ASIC states the company’s remediation program will see $377 million returned to customers. IAG has already compensated 80% of the customers affected by the potentially misleading discounts.

It is worth noting, IAG is just the latest company to be caught up in payback programs.

According to ASIC, since 2018, QBE Insurance Group Ltd (ASX: QBE) has returned $15 million to customers. Westpac Banking Corp‘s (ASX: WBC) General Insurance Limited (now owned by Allianz Australia) has also remediated around $13 million. Finally, Commonwealth Bank of Australia‘s (ASX: CBA) Commonwealth Insurance Limited has handed back around $590,000 to customers since 2018.

IAG share price snapshot

The IAG share price has risen 4.4% this year to date, and around 3% over the past 12 months.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up around 10% and 18% for the corresponding periods.

The post Here’s why the IAG (ASX: IAG) share price is down 3% on Friday appeared first on The Motley Fool Australia.

Should you invest $1,000 in Insurance Australia Group right now?

Before you consider Insurance Australia Group , you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Insurance Australia Group wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

ASX 200 (ASX:XJO) midday update: Rio Tinto cuts guidance, Treasury Wine disappoints

IAG (ASX:IAG) share price on watch as ASIC launches legal action

Could the IAG share price hit $6 by the end of 2021?

Why Ampol, Fortescue, IAG, & Perenti shares are charging higher

ASX 200 (ASX:XJO) midday update: Star shares crash, tech shares tumble

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!