New Zealand’s Financial Markets Authority has issued a warning to Southern Cross Pet Insurance for breaking discount promises to thousands of customers.

The pet insurer failed to correctly apply discounts for additional pets, direct debits and membership, the regulator says.

A similar warning was issued to another Southern Cross Group business, Southern Cross Medical Care Society, after the health insurer failed to correctly apply discounts for low claims levels, healthy lifestyle rewards and free child cover.

The regulator says the businesses breached fair dealing provisions in the Financial Markets Conduct Act by making false or misleading representations.

“The representations relate to the failure on each entity's part to correctly apply advertised discounts to affected customers’ invoices, resulting in overcharged premiums. The [authority] determined that ... each issue was due to poor controls and/or technical errors.”

More than 7500 Southern Cross Pet Insurance customers, about 1.28% of its customer base, were overcharged $424,508, while 1957 Southern Cross Medical Care Society customers were overcharged by $161,547.

The businesses have completed their remediation programs, with 96% of affected pet insurance customers and 90% of affected health members refunded.

The pet insurer made an initial report to the regulator in November 2022, disclosing some of the breaches, and later reported more details.

“Following these disclosures, further enquiries from the [authority] and an internal review in the wider Southern Cross Group, the extent of the contraventions was established,” the regulator said.

The regulator’s Director of Specialist Supervision, Peter Taylor, says the Southern Cross Group did not provide adequate information to customers when it publicly acknowledged the discount issues.

The authority “expects entities to have better systems and controls in place to identify and prevent issues as early as possible and to be transparent with customers when problems arise”, he says.

He says the public warning is “proportionate” because it takes into account the level of harm and that the businesses have repaid most customers.

“They co-operated proactively with the [regulator] and there is no evidence of any deliberate misconduct,” he said.

Southern Cross says it carried out a “comprehensive” process of contacting and refunding affected customers after the errors were uncovered between 2022 and last year.

“We’re extremely disappointed that on this occasion we didn’t give our members and customers the value they were expecting, falling short in delivering what they were entitled to,” Southern Cross Medical Care Society CEO Nick Astwick said.

“We moved quickly to put it right and we know we simply need to be better for our members.”