(Reuters) -Australia's corporate regulator is taking QBE to court, alleging that the country's biggest insurer by gross written premiums misled more than half a million customers about discounts on various products during a five-year period.

The Australian Securities and Investments Commission (ASIC) said in a statement on Wednesday that QBE Insurance (Australia), a member of the ASX-listed insurer, used a certain pricing model to calculate premiums which reduced discounts customers should have received.

Shares of QBE Insurance fell as much as 1.1% to A$16.97, hitting their lowest level since Oct. 17.

"Where insurers make discount promises to renewing customers, they need to have robust systems and controls in place to make sure their customers receive the discounts they were promised," ASIC deputy chair Sarah Court said.

The watchdog has lodged its claim with the Federal Court alleging that between July 2017 and September 2022, the insurance firm sent more than 500,000 renewal notices to retirees, loyal customers, QBE shareholders, those holding multiple QBE policies, and those with QBE policies who had made no claims.

The lawsuit marks the latest problem about discounts for the Australian insurance industry, and casts another spotlight on risk management at insurance firms.

ASIC is seeking civil penalties, declarations and adverse publicity orders.

The move by ASIC comes after the watchdog issued a letter in March to the country's general insurance firms asking for improvement in claim-handling practices, especially in response to severe weather events.

In August 2023, ASIC filed a lawsuit against a couple of units of Insurance Australia Group, alleging they misled customers about loyalty discounts available for certain types of home insurance policies.

QBE said in a statement it had self-reported the failures to ASIC in October 2022, adding that it had taken steps to address the issues following an external review of pricing practices.