IAG, which owns State Insurance and AMI Insurance, has been fined $19.5m in Auckland's High Court. Photo / File
IAG, which owns State Insurance and AMI Insurance, has been fined $19.5m in Auckland's High Court. Photo / File
Insurance company IAG New Zealand has been fined $19.5 million in the Auckland High Court after admitting breaches of the Financial Markets Conduct Act (FMCA).
IAG admitted making false and/or misleading representations in relation to its insurance products between September 2021 and December 2024.
The company failed to correctly pricepremiums charged to customers, and failed to correctly apply important discounts to its insurance products sold via its business divisions and distribution partners.
The breaches, of which 41 were self-reported by IAG to the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko, affected approximately 269,000 customers and resulted in overcharges of approximately $35m.
Some of the issues date back more than 20 years, however, the FMA’s claim is limited to conduct from the introduction of the FMCA, which came into effect from April 2014.
FMA executive director of response and enforcement Louise Unger said the nature and scale of IAG’s contraventions were greater than those present in any other fair dealing case the FMA has to date taken to court.
“IAG is New Zealand’s largest insurer. It is a large and sophisticated market leader and accordingly plays a vital role in upholding market standards, yet its significant under investment led to widespread failures of its systems and processes, to the detriment of its customers.
“It also failed to respond to and report many of the issues in an appropriate timeframe,” Unger said.
“The penalty has been set at a level that sends a clear message to the financial market – and particularly similarly large and well-resourced institutions – as to the importance of investing in robust systems and making good on the promises made to customers."
IAG New Zealand chief executive Amanda Whiting said the company is doing everything it can to prevent the issues happening again.
Justice Andrew found that the nature and extent of IAG’s contraventions to be “the most aggravating feature of its conduct”. and said that the “penalty must be set at a level that sends a clear message to the financial market – and particularly similarly large and well-resourced institutions".
Justice Andrew also noted: “IAG’s knowledge of the breaches and the delay in reporting them to the FMA, particularly following the culture and conduct review, is an aggravating factor”.
The penalty reflects discounts for IAG’s self-reporting, its early offer of admissions, its co-operation with the FMA’s investigation, and the steps taken to remediate its customers.
IAG responds
IAG New Zealand chief executive Amanda Whiting said that since self-identifying the issues, the company’s priority had been to “put things right for impacted customers, offering a sincere apology and issuing refunds”.
“We are doing everything to prevent these issues happening again. The underlying issues have been fixed, and all affected customer’s repayments were completed earlier this year,” Whiting said.
IAG New Zealand said it fully co-operated with the FMA’s investigations and proceedings, while recognising that historically it made mistakes.
The company said it had invested heavily in new systems and processes as they became available, and that “significant changes have been made”, and “will continue to be made”.
Tom Raynel is a multimedia business journalist for the NZ Herald, covering small business, retail and tourism.
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