Tower Insurance has been ordered to pay a $7 million fine by the High Court at Auckland for misleading representations that resulted in more than $11m in overcharges to its customers.

The fine follows admissions in civil proceedings brought by the Financial Markets Authority Te Mana Tātai Hokohoko (FMA) in the High Court at Auckland after Tower self-reported the issue to the FMA in March 2021.

The insurer admitted to breaching section 22 of the Financial Markets Conduct Act by misleading customers in its invoices about its multi-policy discount (MPD) offer since September 10, 2016, resulting in overcharges.

The overcharging continued until February 2025, affecting about 61,000 customers or 90,200 policies – roughly 11% of Tower’s total customer base.

Tower also admitted to making false or misleading representations in marketing material in relation to MPDs.

According to the FMA, Tower has carried out remediation and repaid over $11.7m to customers.

The fine comes eight years after a settlement agreement was reached between Tower and the Commerce Commission in which Tower agreed to fix its policy system that had caused a historical issue, resulting in miscalculations.

Justice Laura O’Gorman said the FMA was “justifiably critical that the previous settlement was intended to ensure Tower sufficiently invested in and maintained adequate systems and processes to ensure any MPD is applied correctly”.

The FMA’s head of enforcement Margot Gatland said Tower’s issues stemmed from deficiencies in its systems.

“Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount,” Gatland said.

“The FMA’s statutory objective is to promote and facilitate the development of fair, efficient and transparent financial markets, and to promote the confident and informed participation of businesses, investors and consumers in financial markets.

“Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists. This is why we continue to respond to fair-dealing breaches like this.”

She acknowledged that Tower had self-reported the MPD issues, co-operated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme.

Tower chairman Michael Stiassny said the company had acted in good faith and fully acknowledged that mistakes were made.

“It was pleasing that the court accepted Tower’s explanation of how the MPD errors occurred, saying that Tower had acted responsibly to address the breaches and that it was not a situation of historic[al] system failures remaining unaddressed,” Stiassny said.

“We accept and regret the impact this has had on our customers and apologise unreservedly to those who were charged inaccurately.”

Tower said it had made significant investments in improving its systems and processes and is removing the multi-policy discount from its insurance offerings.

Recent win

The news comes just days after Tower Insurance won the Most Improved Performance category in the Deloitte Top 200 awards.

Tower chief executive Paul Johnston said that over the last few years the business had focused on becoming a digital direct insurer in selected markets.

He said Tower has taken a disciplined risk-based pricing approach around data and underwriting and offered the best price it can. Policy and customer volumes have continued to grow while average premiums have reduced because of a higher proportion of lower-risk new policies.

“We want to make it as transparent as possible for customers. And in the last year or so, we’ve focused on marketing, branding, telling our story and why you can trust Tower,” Johnston said.

The company came up with the slogan: “Got a minute, get a quote.”

The major transformation replaced legacy technology systems with a single modern, cloud-based digital platform across New Zealand and its Pacific markets in Fiji, Samoa, American Samoa, Cook Islands and Tonga.

As of March this year, 60% of sales, 47% of service tasks and 65% of claims lodgements were completed online and Tower is aiming for 80% digital completion by 2027. The digital shift enabled Tower to simplify the product range from 400 variations to 14.

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.