Suncorp-backed New Zealand insurer AA Insurance is facing civil proceedings over alleged failures to apply discounts and guaranteed no claim bonuses to eligible customers’ premiums, leading to overcharges of $NZ11.2 million ($10.2 million).

The Financial Markets Authority (FMA) filed the proceedings in the High Court in Auckland, seeking a declaration that the insurer contravened section 22 of the Financial Markets Conduct Act (FMC Act). It also wants the insurer to pay a pecuniary penalty for the breaches.

In one of the alleged breaches the regulator says the insurer – a joint venture between Suncorp’s Vero Insurance and the New Zealand Automobile Association (NZAA) – misled customers about its multi policy discount offer in marketing material between 2015 and 2020.

Existing policyholders who added another policy would receive the “multi policy discount” immediately but AA Insurance’s systems were set up to apply the discount when the original policy is up for renewal. The insurer also failed to apply the multi policy discount to customers’ invoices.

FMA says the two issues affected 112,463 customers who were overcharged $NZ4.89 million ($4.4 million) on their premiums.

In another alleged breach the regulator claims that the insurer overcharged 17,973 customers about $NZ3.28 million ($2.9 million) on their premiums between 2005 and 2015 after it failed to apply its guaranteed no claims bonus benefit on comprehensive car insurance policies.

The regulator also alleges AA Insurance failed to apply NZAA membership discounts on the premiums of some eligible customers between 2014 and 2020. These customers qualified for discounts if they held NZAA membership and the failure to provide the discounts affected 112,613 customers who were overcharged premiums of $NZ2.95 million ($2.6 million).

“This is the seventh civil proceeding case the FMA has brought under the fair dealing provisions of the FMC Act since June 2020,” FMA Head of Enforcement Margot Gatland said today in a statement.

“All these cases point to system errors and process failures that for the most part date back prior to 2014, when the FMC Act came into effect.

“While we have acknowledged in each case the efforts companies have made to remediate customers for these issues, the length of time taken to identify and resolve the mistakes in the first place was a key factor in commencing civil court action.”

AA Insurance says the business identified the “historical issues” as part of its regular and ongoing internal reviews and self-reported them to the FMA.

The insurer says it has since corrected the issues and completed comprehensive remediation programs involving refunds to customers, plus interest.

“We accept there were aspects of our processes which weren’t perfect… late last year, we completed the comprehensive remediation programs to put things right for our customers,” CEO Michelle James said.

“When the issues were first identified, we took great care to identify the cause and the number of customers impacted.

“We proactively self-reported to the FMA, we fixed the issues, and made every effort to contact affected customers to apologise and provide refunds. We have worked closely with the FMA throughout the remediation process, providing them with regular updates.”