The Auckland High Court has ordered Vero Insurance New Zealand Limited (Vero), a subsidiary of Suncorp New Zealand, to pay a fine of NZ$3.9m (US$2.31m) for neglecting to apply multi-policy discounts to deserving customers, following procedures brought by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko.
The fine represents the largest the FMA have secured in a case of this kind.
From April 2014 to May 2022, nearly 42,000 affected customers were overcharged a total of NZ$9.9m in premiums due to the issue, as a result of invoices issued by Vero and its intermediaries.
Vero admitted in June 2023 that it broke the rule under section 22, one of the Fair Dealing regulations of the Financial Markets Conduct Act (FMC Act), when it failed to apply these discounts to certain customers.
The penalty hearing saw Justice Venning decree that Vero violated section 22 of the FMC Act. He placed a pecuniary penalty, starting at NZ$6m, reducing it by 35%, and finalising the fine at NZ$3.9 million.
Justice Venning expressed that Vero fell short in fulfilling a crucial aspect of its bargain with customers and offered no suitable explanation about the oversight. He acknowledged that there is inherently a relationship of trust between customers and Vero.
Head of Enforcement at FMA, Margot Gatland, said, “This penalty is the largest the FMA has secured in a case of this kind which reflects the seriousness of the deficiencies in Vero’s systems that affected many customers over a prolonged period.”
She added, “It reinforces the importance to firms of the need to invest properly in systems that deliver benefits promised to customers and should remind the industry that financial institutions will be held to account if they fail to sufficiently invest in systems, controls and processes that ensure all customers are treated fairly.”
The incorrect or misleading statements were included in recurring invoices of the 42,000 customers and were issued for insurance policies related to house and contents, vehicle, and boat insurance. If a customer has more than one risk or cover insured, multi-policy discounts may apply under a single policy or multiple policies.
Vero’s failure was attributed to errors and deficiencies in its systems, which included data entry mistakes by its employees and some intermediaries and the primary responsibility attributed to Vero, which created, possessed, and maintained the faulty systems.
Vero has managed to reimburse NZ$13.97m in overcharges to affected policyholders. It has also donated NZ$95,845 to charities where the affected customers could not be contacted or did not respond to correspondence from the insurer.
