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Tower insurance overcharges 65,000 Kiwis more than $9.5m

Cameron Smith,
Publish Date
Thu, 7 Mar 2024, 3:34pm

Tower insurance overcharges 65,000 Kiwis more than $9.5m

Cameron Smith,
Publish Date
Thu, 7 Mar 2024, 3:34pm

New Zealand’s financial watchdog has filed civil proceedings against insurer Tower over alleged fair dealing breaches resulting in approximately $9.5 million in overcharges to customers.

The Financial Markets Authority (FMA) alleges Tower failed to apply multi-policy discounts (MPDs) to eligible customers’ premiums, affecting approximately 65,000 people since September 2016, breaching section 22 of the Financial Markets Conduct Act.

In a market update last year, NZX-listed Tower said it had anticipated regulatory enforcement action with regard to its inaccurate application of multi-policy discounts and raised a provision at that time.

Today, Tower said they had made significant progress towards remediating about 65,000 customers identified as being owed a refund.

“Over $9.26m (including GST and interest) has already been paid in respect of overcharges of premiums payable by over 58,900 customers. Remediation payments continue,” Tower said in a statement to the NZX.

The company said it had also implemented “significant checks and balances to determine and promptly remediate any further incorrectly applied MPDs”.

“These occurrences are now identified soon after purchase, and in the majority of cases, without the need for any refund.”

For more than 20 years Tower has offered a multi-policy discount for customers that hold two or more eligible policies with the provider, the FMA said.

While the terms of the discount have varied over time, generally customers were eligible if they took out more than one qualifying insurance policy.

However, in invoices and certificates of insurance issued by Tower, the multi-policy discount customers were entitled to, as advertised in marketing at the time, was not applied, the FMA said.

The FMA also alleges that Tower misled customers in marketing material, as it did not make it clear that the discount only applied to specific policies or that the discount would not be immediately applied when the new policy was purchased.

Tower chair Michael Stiassny said that while the company is disappointed the FMA has filed proceedings, it continues to focus on identifying any further actions necessary to prevent overcharging.

“While the company has acted in good faith, self-reported the issue, and is undertaking a comprehensive remediation programme, we accept and deeply regret that customers have been impacted,” Stiassny said.

“We apologise unreservedly and will continue to work in earnest to address outstanding issues.”

Margot Gatland, FMA head of enforcement, said: “These proceedings are another example of where an insurer has failed to invest in the systems, controls or governance processes to ensure that where errors occur, they are picked up quickly and fixed, and customers are remediated in a timely way.

“A significant number of customers have been overcharged over a long period as a result of Tower’s failure to address these problems.”

The FMA is seeking a declaration from the court that Tower contravened the FMC Act and that a pecuniary penalty is paid to the Crown.

Tower’s share price was trading flat at 70c this afternoon.

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