South African-owned insurer Youi has been fined the maximum financial penalty of $100,000 by the Insurance Council following a disciplinary process over misleading sales practices and has been warned any future misconduct will risk it being ousted as a member.
Termination of membership - the most serious penalty the council could impose - was considered but the council board decided on a severe reprimand, the maximum financial penalty allowable, and a warning that a recurrence would lead to termination, said Insurance Council president Chris Black.
To date the Insurance Council, which actively self-regulates fire and general insurers, has never kicked out any members through it has declined one organisation membership.
In deciding not to end Youi's membership, the council took into account that it had offered restoration of harm and apologised to customers, had received and changed its systems and processes to stop a recurrence of the misleading sales tactics, the absence of previous misconduct, and cooperation with the Commerce Commission during its investigation into the insurer's sales techniques earlier this year. Youi's "active contribution to the workings of ICNZ" were said to be another factor taken into consideration.
"ICNZ sets high industry standards for all members to follow and Youi's business conduct has fallen well short of this expectation" said Black.
The board found Youi breached a council rule requiring members to conduct their business in accordance with the Fair Insurance Code and in a legal, honourable and proper manner. Youi accepts that its actions breached its membership obligations and have damaged the industry's reputation, the council said.
In August Youi pleaded guilty in the Auckland District Court to15 representative charges brought against it by the Commerce Commission. The charges include making misleading representations on its website over customers' ability to get a quote, during sales calls including telling clients they had to provide bank or credit card details, asserting a right to payment for unsolicited policies, and sending invoices for insurance policies to unsolicited customers without telling them they had no obligation to pay.
The Commerce Commission's investigation followed a spate of customer complaints relating to instances where policies were sold when only quotes were requested and the failure to cancel insurance policies after being notified.
The financial penalty will go towards funding initiatives that improve consumers' financial capability.