Human error was to blame for IAG NZ’s multimillion-dollar blunder on home and contents policies, the company says.

“It was a legacy issue where the wrong figures were put in on day one of the policy and nobody picked up the error,” a spokesman told insuranceNEWS.com.au. “We are now having to review 150,755 polices but claims will be in the hundreds rather than thousands.”

Last October IAG told the NZ Commerce Commission it had discovered incorrect implementation of automatic sum-insured adjustment clauses on a number of home and contents policies.

It meant the sums were lower than they would have been if the policies were automatically updated.

“Nobody was charged a premium above their stated cover,” the spokesman said.

The error was a breach of the NZ Fair Trading Act, but because IAG co-operated with the regulator no penalty has been imposed.

IAG is contacting clients and brokers to explain the miscalculation on policies held on its Polisy, ASB Connect and Datarich systems.

Sums insured will be corrected at the next renewal. If there is an outstanding claim, IAG will treat it with a corrected sum.

No final figure has been calculated for claims settled with the wrong amounts but there is speculation it may exceed $NZ3 million ($2.3 million).

IAG must report to the commission by October 31 giving details of the remediation process to August 31. It is paying $NZ10,406 ($8246) towards the cost of the commission’s investigation.