Insurance Australia Group Ltd (ASX: IAG) shares are in the red from the opening bell on Tuesday after the insurance giant was hit with its second class action this year.

Law firm Slater and Gordon filed the latest legal proceedings with the Victorian Supreme Court, accusing IAG's subsidiary, Insurance Australia Limited (IAL), of misleading and deceptive conduct over its alleged 'loyalty tax' practices.

Slater and Gordon are the firm representing the first class action as well.

IAG shares are currently swapping hands at $8.61 apiece, less than 1% in the red from the open.

This isn't far off its five-year highs that it nudged the week prior. Let's take a closer look.

IAG shares in spotlight amid second class action

The crux of this latest class action lies in accusations that IAL used a pricing algorithm to identify customers unlikely to switch insurers after it increased premiums.

Slater and Gordon allege the firm then increased the premiums for customers who "were least likely to switch to a different insurer".

Whilst customers were said to receive 'loyalty discounts' with their renewal, the law firm claims these were offset by what it called a 'loyalty tax'.

Ben Hardwick, practice group leader at Slater and Gordon, said that millions of Australians were likely affected. According to The Australian:

Through this group proceedings, consumers are demanding to be compensated for the loss and damages we say they have suffered as a result of IAL's conduct.

The reality is that they are likely to have received cheaper insurance from these brands had their loyalty not been a factor in their renewal calculations at all.

The law firm alleges that IAL's conduct breaches the ASIC Act because customers thought they were getting a good deal.

A repeat of earlier claims

This isn't the first time IAG has been in hot water over alleged pricing practices. Earlier this year, Slater and Gordon launched a separate class action targeting IAL and another IAG subsidiary, Insurance Manufacturers of Australia (IMA). IAG shares weren't badly hit.

The proceedings were over similar accusations involving insurers RACV, SGIO, and SGIC's policies. As you can see, it's very similar language to this latest filing:

Our investigation suggests that IAL and IMA employed pricing strategies which raised the base premiums of customers that they considered less likely to switch to a different insurer.

Unfortunately, this meant that some customers, including long-term customers, may have unknowingly paid more in higher base premiums.

The earlier action focused on customers who renewed policies between May 2018 and May 2024.

IAG has not yet publicly responded to the latest class action, but in May, it said it would defend it.

"IAL and IMA intend to defend the proceedings commenced by Slater and Gordon", it said.

Foolish takeaway

IAG shares are in the spotlight today as a second round of legal proceedings unfold for the insurer.

The company hasn't labelled anything price-sensitive related to the matter at the time of writing. Nor does this change anything fundamental to the operations of the business.

In the last 12 months, the IAG share price is up 46%.