Regulator takes IAG NZ to court over pricing, discount breaches
New Zealand’s Financial Markets Authority has launched court action against IAG over “extensive breaches” of fair trading laws.
IAG New Zealand says it “promptly acknowledged its wrongdoing” after it identified the issues and notified the regulator. It is not challenging the civil proceedings at the High Court in Auckland.
The FMA says IAG failed to correctly price premiums and to correctly advertise and apply discounts to insurance products sold via its different divisions and distribution partners.
The breaches affected about 269,000 customers and resulted in overcharges of $NZ35 million ($32.02 million), with a net gain to IAG of $NZ31.1 million ($28.46 million), according to the regulator.
“The scale of IAG’s fair dealing breaches is extensive, impacting its core business,” FMA head of enforcement Margot Gatland said today. “IAG is New Zealand’s largest general insurer, including in the personal lines insurance market. Its distribution model relies on its brands and distribution partners, which reinforces the importance of the reliability of its systems.”
The FMA says IAG self-reported the breaches after the regulator examined the conduct and culture of general insurers earlier this decade.
The findings of that review, released in 2021, flagged issues around pricing and multipolicy discounts not being applied, overcharging on agreed premiums, and no-claims bonuses not being applied. “The basic requirement that premiums are accurate, transparent, administered correctly and with value communicated to the customer has clearly not been met in a number of situations,” the review said.
Ms Gatland says IAG’s self-reporting was followed by “very early admission of liability, and its full co-operation, including its commitment to an undefended proceeding”.
She says IAG has provided “regular updates as to its full customer remediation and its significant system upgrades designed to prevent further breaches”.
IAG New Zealand CEO Amanda Whiting said: “We are doing everything to prevent these issues happening again. Our investigations also found that a significant number of customers benefited from being undercharged.”
In a statement to insuranceNEWS.com.au she says the underlying issues have been fixed, and repayments will be completed by June 30.
“Since identifying these issues, our focus has been on putting this right for our customers who were impacted, providing them with their refund and apologising for our mistakes,” Ms Whiting said. “IAG recognises that historically it made mistakes, and it has invested heavily in systems and processes that needed improvement. Significant changes have been made and will continue to be made.”
The FMA says some of the issues at IAG date back more than 20 years, but the court proceedings are limited to breaches occurring after introduction of the Financial Markets Conduct Act in April 2014.
The proceedings feature eight pleaded causes of action including IAG’s inconsistent application of discounts on ASB-branded policies; failure to provide discounts on Westpac-branded policies; and overcharging ASB and AMI customers for premiums and emergency service levies.