IAG New Zealand chief executive Amanda Whiting. Photo: Supplied / IAG
- IAG admits to overcharging 239,000 customers $35m
- Company failed to apply multi-policy discounts through its NZI, State, AMI brands and policies sold through major banks
- Finance regulator says IAG systems deficient
- Company self reported breaches, paid back affected customers
The country's biggest insurance company, IAG, is being taken to court for overcharging about 239,000 customers $35 million by not giving promised discounts and benefits.
The Financial Markets Authority (FMA) has started civil proceedings against the company for not correctly pricing the premiums charged to customers, and failures to correctly advertise and apply important discounts to its insurance products.
FMA head of enforcement Margot Gatland said the IAG breaches were extensive.
"IAG is New Zealand's largest general insurer, including in the personal lines insurance market. Its distribution model relies on its brands and distribution partners, which reinforces the importance of the reliability of its systems."
IAG has the AMI, NZI, and State insurance brands, but also sold policies through the ASB, BNZ, Westpac, and Co-operative banks as well as specialist car insurance policies.
Gatland said some of the breaches went back more than 20 years, but the FMA was only able to investigate and take action on breaches from 2014 onwards when the current legislation came into force.
She said the net gain for IAG was about $31.1 million.
Apologetic IAG admits mistakes
IAG's New Zealand chief executive Amanda Whiting said it had discovered the errors and reported them to the FMA.
"I apologise to our customers who were inaccurately charged or did not receive the discounts they were entitled to at the time."
She said the underlying issues have been fixed and all affected customers would be repaid by the end of June.
"Since identifying these issues, our focus has been on putting this right for our customers who were impacted, providing them with their refund and apologising for our mistakes."
Whiting said they had found also that a significant number of customers were undercharged.
The FMA's Gatland said IAG's conduct had been "exemplary" from self reporting the errors, admitting liability, and recompensing customers, through to upgrading its systems and co-operating with the authority.
IAG is the latest big financial institution to have fallen foul of the FMA crackdown, which has resulted in the ANZ, Kiwibank, Westpac and several finance and insurance companies being penalised millions of dollars.
The FMA says its actions over the past few years have resulted in more than 1.5 million customers being paid back about $215m.
