By 1news.co.nz
The Financial Markets Authority (FMA) has filed civil proceedings against AA Insurance (AAI) at the High Court in Auckland, alleging the company failed to apply proper discounts — resulting in $11.12 million in overcharges.
In a statement released today, the financial regulator made a raft of allegations against the insurer — accusing them of failing to apply multi-policy and membership discounts alongside guaranteed no-claims bonuses to eligible customers’ premiums.
It said AAI used misleading marketing to advertise its multi-policy discount in 2015 and 2020.
“The marketing material represented existing policyholders who added another policy would receive the multi-policy discount immediately,” the statement reads.
“However, AAI’s systems were set up to apply the discount once the original policy was up for renewal rather than immediately.”
The FMA went on to say AAI failed to apply the discount to customers’ invoices.
Both issues led to 112,463 customers being overcharged $4.89 million.
AAI is also accused of failing to apply NZAA membership discounts to premiums for some eligible customers between 2014 and 2020.
NZAA members are entitled to discounts on their insurance premiums with AAI.
The FMA claims 112,613 of these customers didn’t have their discounts applied properly, resulting in $3.12 million in overcharged premiums.
Another allegation levied against the insurer is that 17,973 eligible customers were overcharged $3.28 million on their premiums after it failed to apply its “guaranteed no-claims bonus benefit” on comprehensive car insurance policies.
The insurer noticed these issues in 2018 as part of their internal reviews, self-reporting to the FMA. The issues have since been corrected, according to AA.
The FMA attributed these overcharges to poor administration, customer confusion and insufficient systems for when things went wrong.
“All three failures were due to errors in AAI’s sales and fulfilment systems, incorrect data entry by its employees and deficiencies in its policy administration systems,” the FMA said.
“Some errors were caused by customers taking out policies online, where they did not tick a box confirming they held another policy or a NZAA membership.
“However, AAI did not have the reporting in place to identify those customers and ensure that the discounts were being applied correctly.”
While AAI confessed to the mistakes, FMA head of enforcement Margot Gatland said the amount of time it took to identify and resolve them was far too long.
“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,” she said.
“This is the seventh civil proceeding case the FMA has brought under the fair dealing provisions of the FMCA since June 2020. 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.”
They are seeking a declaration from the court that AAI “contravened section 22 of the FMC Act on all three matters” — and that they are fined for the breaches.
In response to the allegations, AAI admitted to the mistakes, apologising to its customers.
“We reiterate the apology we have made to all those affected by these historical issues,” AA Insurance chief executive Michelle James said.
“We accept there were aspects of our processes which weren’t perfect, and we’ve put our customers at the heart of our response to these issues. Late last year, we completed the comprehensive remediation programmes to put things right for our customers.”
She said that the company has been making “every effort” to contact affected customers and apologise.
“When the issues were first identified, we took great care to identify the cause and the number of customers impacted. We proactively self-reported to the FMA, we fixed the issues and made every effort to contact affected customers to apologise and provide refunds,” James said.
“We have worked closely with the FMA throughout the remediation process, providing them with regular updates.
“AA Insurance remains committed to being open, honest, and transparent with our customers and living up to our reputation as one of New Zealand’s most trusted companies.”