The NSW State Insurance Regulatory Authority has imposed a $479,500 penalty on IAG for customer overcharges and under-refunds at its NRMA Insurance brand.

The regulator says weaknesses in compulsory third party systems resulted in contraventions of IAG’s obligations in relation to eight separate matters.

NRMA Insurance – one of six authorised CTP providers in the NSW scheme – is remediating affected motorists and co-operated throughout SIRA’s investigation.

In a letter to IAG, SIRA says the most serious contravention was the application of incorrect rating districts, stemming from an error in IAG’s legacy Huon policy administration system.

This affected almost 42,000 policies, with estimated overcharges of $12.2 million. The error led to a $90,000 penalty – the largest of the eight imposed.

“Several contraventions occurred within the Huon operating environment and reflected broader control weaknesses,” SIRA says. “The matter involved a substantial affected population, significant estimated customer detriment and failures in core pricing and data controls.

“The resulting departure from the premiums filed with the authority also affected the integrity of the regulated premium framework.”

IAG, which was first notified of problems in October 2025, says each matter had a different cause, and it argued a letter of censure would be the more appropriate regulatory response.

But SIRA – which can impose a civil penalty instead of suspending an insurer’s licence – decided penalties were appropriate given the “seriousness of the contraventions, the customer and scheme impacts [and] the control failures identified”.

The regulator also notes NRMA Insurance’s regulatory history. SIRA imposed a $10,000 penalty in January last year over demerit point loadings on CTP renewals, and it issued several censure letters in 2023.

IAG was fined $40 million in 2023 over promised loyalty discounts that were not delivered.

NRMA Insurance today acknowledged the penalties in relation to "issues we identified and self-reported" earlier this year. 

"Once identified, our focus was addressing the issues, apologising to those customers impacted, and providing remediation payments, with interest, as quickly as possible," a spokesperson said.

"The issues were identified as part of our transition from a legacy operating system to a new technology platform (our Enterprise Platform).

"The new technology platform is a significant enhancement to our policy and claims system which will help to prevent similar issues happening in the future."

SIRA says overcharging policyholders “undermines confidence in the fairness and integrity of the scheme” and a licensed insurer is required to maintain effective systems and oversight arrangements.

NRMA Insurance can seek a NSW Civil and Administrative Tribunal review of the decision.

Below are the other seven contraventions:

• A relationship discount was not applied correctly to eligible new customers from April 2024 until November last year, affecting 16,033 policies, with estimated overcharges of about $662,000.
• NRMA Insurance calculated some cancellation refunds from the policy purchase date rather than policy commencement, affecting about 15,176 policies, with estimated under-refunds of $118,421.
• Incorrect risk state factors were mapped in the pricing system, affecting 2831 policies and 2762 customers, with estimated overcharges of about $70,320.
• An incorrect maximum malus factor was used in the price ceiling calculation, affecting 24,579 policies, with estimated overcharges of $226,635.
• From April 2024, inaccurate years-of-relationship information appeared in CTP renewal documents and was used in determining premium discounts. A review of 727,000 policies and assessment of 611,000 customers was required.
• For 11 days, NRMA Insurance used a superseded July 2024 premium filing, resulting in undercollection of $81,568 in fund levies. IAG later paid the levy shortfall and undertook customer remediation.
• For January and April 2025 premium filings, incorrect vehicle relativities were applied, affecting 303,475 policies, with estimated overcharges of $26,945 and estimated undercharges of $1.7 million. IAG has not sought to recover the undercharges.