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AAMI caught in misleading advertising trap

Adam Zuchetti
Adam Zuchetti
22 November 2017 1 minute readShare
Caught, red tape, tied, trap, business

Demonstrating the red tape burden facing businesses over the definition of “misleading advertising”, insurance giant AAMI has been heavily penalised over a minor technicality.

In promoting its Home Building Insurance ‘Complete Replacement Cover’ offering, AAMI said on its website and in radio advertisements that it would repair or rebuild an insured home, no matter the cost.

However, the Australian Securities and Investment Commission (ASIC) took the view that it wasn’t the product itself that was misleading, but how this explanation of the product could be interpreted.

“ASIC was concerned the statements were misleading because they did not disclose that, while AAMI could choose to arrange the repair or rebuild of the insured house, it could also choose to pay the policyholder the assessed cost of repairing or rebuilding the house, leaving the policyholder to arrange the repair or rebuild,” the regulator said in a statement.

The insurer has already amended its advertising in light of ASIC’s concerns, and paid penalties worth $43,200.

“While we recognise that AAMI offers a type of home building policy that can help reduce the risk of underinsurance, advertising must not mislead consumers,” Acting ASIC chair Peter Kell said.

“Customers decide to take out a particular type of cover based on what is advertised.”

Misleading advertising has snared many businesses, many of which were likely inadvertent and not deliberate.

In August this year, My Business investigated the issue of misleading claims, and found that ultimately there is no legal definition of what constitutes ‘misleading’.

It came as business owners sought to understand wildly differing penalties handed down to various businesses for allegedly misleading claims around products and services.

One My Business reader summed up the situation perfectly, noting that “semantics is a very expensive business!”


AAMI caught in misleading advertising trap
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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