Misleading advertisement results in car insurer AAMI paying a $20,400 penalty

AAMI has paid $20,400 in penalties after ASIC issued two infringement notices for false or misleading advertisements promoting AAMI car insurance. Each infringement notice imposed a penalty of $10,200.

The television and online advertisements included the headline claim ‘AAMI FLEXI-PREMIUMS COULD SAVE YOU AN AVERAGE OF $357 OFF YOUR NEW POLICY’ and a verbal representation stating: ‘Switch your car insurance and AAMI Flexi- Premiums could save you an average of $357 off your new policy.’

ASIC was concerned that the representations were false or misleading because they…

  • were likely to give the impression that savings could be achieved by consumers if they switched their car insurance from their current insurer to AAMI. In fact, the specified savings were based on a comparison between different AAMI premiums with different levels of excess chosen, rather than between a competitor’s product and AAMI’s product.
  • did not adequately convey that AAMI customers would need to choose the maximum level of excess in preference to the minimum level of excess to achieve the specified dollar savings. Based on AAMI’s analysis of a sample of their own customers, AAMI was aware that most customers did not choose the maximum excess.

Although AAMI included fine print within the advertisements to explain how the savings could be achieved, ASIC considered these to be ineffective having regard to the relative size of font, density of text, and compelling visual and other messages.

ASIC Deputy Chairman, Mr Peter Kell said: ‘Advertised savings must be reasonably achievable and properly and prominently explained.’

‘In this case, the fine print text disclaimer that attempted to explain the savings was so obscure that it was almost impossible for viewers to understand the underlying reality of the advertised claims.’ Mr Kell said.

The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

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