FMG admits misleading insurance charges after FMA investigation, pays back $5.3m to customers

FMG Insurance has admitted to fair dealing breaches over several years.

FMG Insurance and Farmers’ Mutual Group (together, FMG) has admitted to making misleading representations about certain insurance products to thousands of customers.

An investigation by the Financial Markets Authority (FMA), after FMG self-reported the issues, uncovered that customers were being charged for specified items that provided no additional insurance benefit, as well as incorrect inflation adjustments applied to sums insured.

Between 2012 and 2024, some FMG customers with household contents insurance policies were charged additional premiums for specified items even though those items were already covered under the general contents sum insured, effectively double charging.

From April 1, 2014, to 2024, 3904 customers were affected, and have since been paid remediation of $1.9 million in overcharged premiums by FMG.

FMG also made five claims top up-payments totalling roughly $6000.

The insurer acknowledged that it had made misleading representations about the need to specify items and the additional cover customers would receive, breaching sections 22(d) and 22(g) of the Financial Markets Conduct Act.

On top of that, between 2013 and 2024, FMG applied annual flat rate increases to certain customers’ maximum insurance limits (sums insured), even where policies suggested such adjustments would be inflation-based or no longer contained an inflation clause at all.

These adjustments, which were inconsistent with policy wording, resulted in a total of 54,642 customers being affected between April 1, 2014 and 2024.

Approximately 26,000 customers were due a refund as a result of overcharged premiums, with a further 480 customers paid claim top-up payments.

FMG made false or misleading representations in renewal statements that inflation adjustments had been applied and premiums calculated in accordance with policy terms, after claiming it had the right to charge those amounts.

The insurer has since paid remediation for the issue, totalling roughly $3.38m.

As well as remediating customers, FMG has agreed to pay $2.1 million in lieu of a pecuniary penalty, pursuant to an enforceable undertaking.

FMA’s head of enforcement, Margot Gatland, said that insurers must ensure their representations to customers are accurate, clear and consistent with policy terms.

“Following our investigation, we determined that FMG’s representations to customers were false or misleading and caused customer harm.”

She acknowledged FMG’s co-operation and its commitments outlined in the enforceable undertaking that it will strengthen systems and rewrite policy wording to prevent recurrence.

“The FMA will continue to prioritise fair customer outcomes and take action where misleading conduct occurs in the financial services sector.”

In a statement on its website, FMG chief executive Adam Heath sincerely apologised to the insurer’s clients and members for the historical issues and for the inconvenience they caused.

“All affected clients have been contacted, and our refund processes will be substantively complete by the end of March 2026. Approximately $5.3m will have been paid to clients in refunds and claim top-ups once these issues are fully remediated,” Heath said.

Heath said FMG had strengthened its systems, processes, and controls to help prevent similar issues occurring again in future.

“FMG remains committed to maintaining the trust of our clients and members and we are grateful for the patience they have shown us as we worked through these issues.”

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.

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