“The breaches arise from IAG’s failures to correctly price the premiums charged to customers and its failures to correctly advertise and apply important discounts to its insurance products sold via its business divisions and distribution partners,” the authority said today.
IAG self-reported the issues after the authority’s conduct and culture reviews of banks, life insurers and fire and general insurers.
“Approximately 269,000 customers were affected by the pleaded breaches, resulting in overcharges of approximately $35 million, with net gain to IAG of approximately $31.1m,” the authority said.
“The scale of IAG’s fair dealing breaches is extensive, impacting its core business,” FMA head of enforcement Margot Gatland said.
She said IAG’s distribution model relied on its brands and distribution partners, reinforcing the importance of the reliability of its systems.
But Gatland also said IAG’s response to the investigation was “exemplary”.
She said IAG’s self-reporting was followed by its early admission of liability and its full co-operation, including its commitment to an undefended proceeding.
The proceedings were filed at the High Court in Auckland.
In an issue with ASB multi-policy discounts, IAG inconsistently applied advertised discounts to customers who had purchased two or more of its ASB-branded policies.
“As a result, some eligible customers were overcharged premiums. Some customers holding caravan and trailer policies were also incorrectly advised that they were eligible for the [discount] when they were not,” the FMA said.
In a no-claims-bonus issue, some customers entitled to a no-claims bonus did not have the discount applied as intended.
The authority said another issue was with a Westpac owner-occupier discount.
IAG customers with Westpac-branded policies for their owner-occupier home were entitled to a discount on any car, contents and boat policies they also held.
“This was inconsistently applied. As a result, some eligible customers did not receive the discount,” the authority said.
IAG identified and reported these issues to the FMA, promptly acknowledged its wrongdoing and fully co-operated with the FMA’s investigations.
IAG New Zealand chief executive Amanda Whiting said the insurer had been focused on making amends, providing affected customers with refunds and apologising for mistakes.
“We are doing everything to prevent these issues happening again,” Whiting said.
“Our investigations also found that a significant number of customers benefited from being undercharged … The underlying issues relating to these matters have been fixed and repayments will be completed by June 30 this year,” she said.
IAG said it had invested heavily to improve systems and processes where necessary.
“Significant changes have been made and will continue to be made. IAG remains committed to continuous improvement, reflecting on the errors of the past and creating better systems to avoid errors in the future.”
IAG trades under the AMI, Lantern, Lumley, NAC, NZI and State brands. It also provides general insurance products, which the ASB, BNZ, The Co-operative Bank and Westpac sold.
Several insurers in recent months have ditched multi-policy discounts.
The FMA filed proceedings against AA Insurance in 2023 for failing to apply multi-policy and membership discounts.
In the same year, Vero was ordered to pay a $3.9m penalty for failing to apply multi-policy discounts to customers.
