When Cigna increased some premiums and cover under indexation benefits, it used rates surpassing the Consumers Price Index, not in line with fixed rates contained in customer policies.
The Cigna customer said the life insurer couldn’t seem to give her a plausible answer when she previously queried rising premiums.
She said she’d received confusing information about whether her policy was related to the court case.
“I used to query as to why this index calculation affected me and why they were imposing it on me,” the Cigna customer told the Herald.
“They said ‘no, that’s the rule and that’s how it’s going to be’.”
She asked that her name not be used as her public sector manager discouraged staff talking to media.
“The husband and myself, we had two life insurance policies. Because we invested in our home, that was a mandatory requirement,” she said.
“I had a young family and I couldn’t afford the insurance but we had to get it ... I just bit the bullet and went on. They kept increasing the amount,” she added.
“We were doing a monthly payment and spending a lot of money on insurance.”
She said indexations all should be revisited, and more transparency was needed for policyholders and the industry.
She added: “This is something intangible right now and there has to be fairness in the application of the revision of the premiums. We are paying for this over a lifetime.”
She said she’d been with Cigna since before 2019. The couple spent up to $457 a month on insurance, and she recently asked Cigna about related issues.
“They applied different percentages of indexation for the husband and me, and they gave me some gobbledygook that because of Covid, some indexation had not been [increased].”
A Cigna spokesman said any customers with questions about indexation issues or the court case should contact Cigna and use “indexation” as a reference.
“Details of the remediation were shared with the FMA, which has acknowledged our full co-operation in this matter and that it was not our intention to mislead customers,” he added.
“More than three in four customers contacted by the company have chosen to keep their indexed cover.”
An FMA spokesman said that by law, civil pecuniary penalties from the Cigna case go to the Crown. The Financial Markets Conduct Act outlined how penalties were paid.
In practice, a financial penalty is first paid to the FMA. Then the authority’s actual staff costs are netted off, and the rest goes to the Crown.
The FMA said companies in similar situations often took steps to compensate customers, especially when companies accepted they broke the law.
“If they do not, the court can order it if either the FMA or another person seeks it,” the FMA added.
Cigna reported the matter in February 2019. It began a remediation programme seven months later.
By early August last year, Cigna had repaid $10.8m of additional premiums to customers through the remediation programme.
Cigna said it would not appeal Justice Jillian Mallon’s judgment or penalty, so the court case was closed.
