Tens of thousands of customers were allegedly overcharged
The Financial Markets Authority (FMA) has filed civil proceedings against AA Insurance (AAI) in High Court in Auckland for allegedly overcharging tens of thousands of customers.
FMA alleged that AAI breached section 22 of the Financial Markets Conduct Act (FMC Act) when it failed to apply multi-policy and membership discounts, as well as guaranteed no-claims bonuses to eligible customers’ premiums between 2015 to 2020. The insurer also allegedly failed to apply the multi-policy discount to customers’ invoices.
The issues allegedly resulted in 112,463 customers getting overcharged $4.89 million on their premiums.
The authority also claimed that AAI failed to apply NZAA membership discounts to the invoices of approximately 112,613 eligible customers, resulting in $2.95 million in overcharged premiums.
Furthermore, FMA also alleged that AAI overcharged 17,973 eligible customers $3.28m on their premiums from 2005 to 2015, after it failed to apply its guaranteed no-claims bonus benefit on its comprehensive car insurance policies.
AAI’s failures were due to errors in AAI’s sales and fulfilment systems, incorrect data entry by its staff, and deficiencies in its policy administration systems, FMA said. Some errors were also due to customers not ticking a box confirming they held another policy or an NZAA membership when taking out policies online. However, AAI did not have the reporting set up to identify those customers and ensure that the discounts were being applied correctly, FMA said.
The full scale of the issues was revealed by a 2019 investigation by AAI, after a 2018 audit identified potential failings in the application of the multi-policy and membership discounts.
The insurer reported the multi-policy and membership discount issues to FMA in February 2020 while the guaranteed no-claims bonus issue was reported in June 2021.
“This is the seventh civil proceeding case the FMA has brought under the fair dealing provisions of the FMCA, since June 2020,” said Margot Gatland, FMA head of enforcement. “All these cases point to system errors and process failures that for the most part date back prior to 2014, when the FMC Act came into effect.
“While we have acknowledged in each case the efforts companies have made to remediate customers for these issues, the length of time taken to identify and resolve the mistakes in the first place was a key factor in commencing civil court action.”
FMA said it is seeking a declaration from the court that AAI contravened section 22 of the FMC Act on all three matters and that AAI pay a pecuniary penalty for the breaches.
Have something to say about this story? Let us know in the comments below.
