Vero New Zealand has been penalised $NZ3.9 million ($3.6 million) for failing to deliver on promised multi-policy discounts to thousands of customers who had bought house and contents, vehicle and boat products from the Suncorp-owned insurer.

The Auckland High Court imposed the fine in a penalty hearing this week, a year after the Financial Markets Authority (FMA) commenced proceedings against Vero.

False and/or misleading statements were made in periodic invoices issued to affected customers who should have received discounts for having more than one risk or cover insured under one policy, or under multiple policies.

But Vero failed to apply the discounts due to errors and deficiencies in its systems, and between April 2014 and May last year the insurer and its intermediaries sent out invoices to about 42,000 affected customers and overcharged them NZ$9.9 million ($9.2 million) in premiums.

In June this year Vero admitted it breached the Financial Markets Conduct Act’s fair dealing provisions by not applying multi-policy discounts to some customers who were entitled to them.

“This penalty is the largest the FMA has secured in a case of this kind which reflects the seriousness of the deficiencies in Vero’s systems that affected many customers over a prolonged period,” FMA Head of Enforcement Margot Gatland said in a statement today.

“It reinforces the importance to firms of the need to invest properly in systems that deliver benefits promised to customers and should remind the industry that financial institutions will be held to account if they fail to sufficiently invest in systems, controls and processes that ensure all customers are treated fairly.” 

Vero self-reported the matter to the FMA in December 2019, at which time its remediation program had been under way for some months.

However the insurer had not fully reviewed all affected intermediary channels and the FMA asked Vero to undertake a full investigation and remediation plan.

The business subsequently discovered an even greater number of affected customers. It has reimbursed $NZ13.97 million ($13 million) in overcharges to affected policyholders and also paid $NZ95,845 ($89,783) to charities where affected customers could not be reached or did not respond to contact from the insurer.

Vero says its priority has been to “put things right” after it identified the issue and reported the matter to the FMA.

“We have and always will make things right where we have made a mistake,” Vero says in an email to insuranceNEWS.com.au following the court decision.

“Finding errors and fixing them is an important part of doing business. Our remediation efforts have meant we have worked thoroughly and conscientiously alongside our distributing partners and intermediaries, and fully reimbursed (with interest) both past and present customers that were entitled to the discount.”