Insurer admits giving "false and misleading" information to customers

Insurer admits giving "false and misleading" information to customers | Insurance Business New Zealand

Insurer admits giving "false and misleading" information to customers

Life insurer AIA has admitted to making “false and misleading” representations to customers in proceedings filed by the FMA at the Auckland High Court.

AIA self-reported several breaches to the FMA as part of its 2018 review into the conduct and culture of life insurers, conducted with the Reserve Bank of New Zealand. The three breaches related to incorrect information and “misleading communications” to customers regarding various life insurance and associated policies.

The incorrect information related to passback benefits, ongoing charging of premiums after policies had been terminated, and wrongly ceasing cover for customers whose policies remained in force. AIA had also applied incorrect inflation adjustments to premiums, resulting in customers being charged excess premiums.

The FMA said it took a number of facts into account when deciding to bring this action, including AIA’s self-reporting, its remediation efforts, the nature of the misconduct and the number of affected customers.

“Consumers’ trust in the integrity of their life insurance provider is paramount for the industry to be effective,” FMA head of enforcement Karen Chang said.

“This case demonstrates that firms providing critical insurance must ensure they have necessary systems and controls in place to perform their core business and manage their customers’ policies correctly.”

“The customers affected by the passback benefits issue will have undergone a traumatic and lifechanging event before making a claim.”

“AIA’s behaviour exacerbated and prolonged the harm to customers who were already in vulnerable circumstances,” she said.

“They took out insurance to reduce stress and financial impact in a time of significant hardship and uncertainty, but when they needed the cover they had been told they had, it was denied. Moreover, AIA would not pay out until much later.”

Given that AIA reported the breaches at an early stage, the FMA said that it will now proceed directly to a penalty hearing and avoid the cost of a trial.

AIA New Zealand said that it has reached an agreement with the FMA, and that it has worked “relentlessly” to remediate these issues with affected customers.

“After conducting an internal review, we found a small number of instances where we may have fallen short of our own standards and commitment to being as transparent as possible with our customers,” AIA NZ CEO Nick Stanhope said.

“Since self-disclosing these issues to the FMA, we have worked relentlessly to remediate these complex issues, whilst engaging and cooperating with the FMA throughout. We have also worked swiftly with the FMA to come to a resolution.”

“Our remediation process is complete and, if a customer was impacted by one of the issues, they have already heard from us directly and we have put the issue right,” Stanhope said.

“As part of this remediation, we have also reviewed our systems and processes to ensure this does not happen again. We always strive to do the right thing by our customers and community, and this situation is no different.”