FMA seeks fine against Vero in High Court case

FMA seeks fine against Vero in High Court case | Insurance Business New Zealand

FMA seeks fine against Vero in High Court case

Vero Insurance New Zealand Limited is facing possible monetary penalty as part of the proceedings filed by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko in the Auckland High Court.

“The FMA claims Vero contravened the fair dealing provisions of the Financial Markets Conduct (FMC) Act by incorrectly stating the premiums owed by customers who were entitled to [multi-policy] discounts,” noted the regulator in a release today.

“The false and/or misleading statements were made in periodic invoices issued to affected customers in relation to house and contents, vehicle, and boat insurance. Multi-policy discounts apply when a customer has more than one risk or cover insured under one policy, or under multiple policies.”

The matter, which the Suncorp Group insurer had reported to the regulator, was attributed to errors and deficiencies in Vero’s systems. It was noted that the errors included those committed by Vero staff and intermediaries during data entry.

“Vero reported the issue to the FMA in December 2019, at which time its remediation programme had been underway for some months,” stated the watchdog, which also described the insurer as having been cooperative. “However, Vero had not fully reviewed all affected intermediary channels, so the FMA requested the insurer to undertake a full investigation and remediation plan.

“Vero subsequently discovered an even greater number of affected customers. The FMA understands Vero has reimbursed $10,259,000 in overcharges to affected policyholders.”

While the failure to apply multi-policy discounts supposedly dates back to 2009, the High Court Case – through which the regulator is seeking a declaration that Vero contravened the FMC Act and a pecuniary penalty – only covers the period from April 2014, as the legislation was not in place before then.

The case spans approximately 47,000 customers and $8.7 million in excess premiums.

“The scale of customer harm caused by Vero’s system failures is significant, and we consider Vero was slow to investigate the issue, despite even being pressured at one point by one of its intermediaries,” declared FMA enforcement head Margot Gatland. “Vero was aware from 2010 that there were issues with its systems but failed to adequately recognise their magnitude.

“Vero’s systems were open to manual error and it had no audit system to pick up these errors. By filing this case, we are sending a strong message that financial services firms must invest in robust systems and controls.”

Meanwhile Vero boss Jimmy Higgins, who conceded that any negative effect on policyholders is unacceptable, commented: “We are sorry for the impact this has had on some customers. Our priority has been to make it right for customers, and we have been working hard to contact anyone impacted, whether they still have a policy with us or not.

“We remain focused on fixing any issues we find as quickly as possible and continue to look for ways we can deliver great outcomes for customers.”