The High Court has imposed a NZ$19.5m (US$11.34m) pecuniary penalty on IAG New Zealand Limited after the insurer admitted to multiple breaches of the Financial Markets Conduct Act (FMCA), including false and misleading representations concerning the pricing and discounts of its insurance products.
The case, filed by the Financial Markets Authority (FMA) in April, revealed what the Court described as “widespread systems and process failures” at the country’s largest insurer. Between September 2021 and December 2024, IAG self-reported 41 issues to the FMA, with 10 of the most significant forming eight causes of action in the proceedings.
Justice Andrew found the “nature and extent of IAG’s contraventions to be the most aggravating feature of its conduct,” adding that the “penalty must be set at a level that sends a clear message to the financial market – and particularly similarly large and well-resourced institutions – as to the importance of investing in robust systems and making good on the promises to customers.”
The breaches, which affected around 269,000 customers, resulted in overcharges of roughly NZ$35m. Although IAG has fully remediated affected policyholders and cooperated extensively with the regulator, the Court held that the harm and the scale of the failings warranted a significant penalty.
FMA Executive Director for Response and Enforcement Louise Unger said in a media release on 6 October that the ruling underscores the seriousness of IAG’s conduct. “The nature and scale of IAG’s contraventions was greater than those present in any other fair dealing case the FMA has to date taken to Court, and the judgment confirms they warrant a significant penalty,” she said.
“IAG is New Zealand’s largest insurer. It is a large and sophisticated market leader and accordingly plays a vital role in upholding market standards, yet its significant underinvestment led to widespread failures of its systems and processes, to the detriment of its customers. It also failed to respond to and report many of the issues in an appropriate timeframe.”
Justice Andrew noted IAG’s eventual cooperation, including self-reporting and remediation, as grounds for a 35 per cent discount to the starting penalty of NZ$30m. Even so, he concluded the final amount “satisfies the objectives of the FMCA and reflects the particular circumstances of this case.”
