Eric Johnston April 11, 2012
Rural services specialist Elders Insurance has been forced to repay customers about $5.3 million after it was found to have underpaid on car insurance payouts over several years.
Elders has so far paid more than 9300 customers, although it is still on the hunt for about 350 former customers for whom it no longer has contact details.
The move has caught out insurance major QBE, which provides all the insurance products that are sold through Elders.
Up until September 2010, Elders' motor vehicle insurance policy covered the cost of stamp duty on the purchase of a replacement vehicle where the insured vehicle was a total loss.
Stamp duty varies from state to state but on average is about 3 per cent of the purchase price.
Despite this, Elders had failed to include the stamp duty amounts when paying total loss market value claims.
Elders was alerted to the underpayments through the Financial Ombudsman Service in late 2010. The company then advised corporate regulator the Australian Securities and Investment Commission about the under payments.
Elders worked with ASIC to implement a review and program to pay the outstanding amounts, including interest, to eligible customers.
ASIC said it acknowledged Elders' co-operation in responding to this issue.