Insurance firm Tower has been ordered to pay a $7 million penalty after overcharging more than 61,000 customers by $11 million through misleading multi-policy discount claims.
The High Court in Auckland handed down the penalty after the general insurer admitted breaching the Financial Markets Conduct Act by misleading customers in invoices about its multi-policy discount offer from September 2016 until February 2025.
The Financial Markets Authority brought civil proceedings against Tower Limited after the company self-reported the issue in March 2021.
Tower admitted to making false or misleading representations in both invoices and marketing material related to multi-policy discounts, affecting approximately 90,200 policies or about 11% of its total customer base.
The insurer has carried out remediation and repaid over $11.7 million.
Tower had offered a multi-policy discount to customers holding multiple qualifying insurance policies for more than two decades.
In 2017, Tower entered into a settlement agreement with the Commerce Commission in which it agreed to fix its policy system after a historic issue caused the miscalculation of multi-policy discounts.
Justice Gorman accepted the FMA's criticism that the previous settlement was intended to ensure Tower invested in and maintained adequate systems to deliver any multi-policy discount correctly, including through migration processes.
FMA head of enforcement Margot Gatland said Tower's issues stemmed from system deficiencies that meant it failed to deliver a publicly advertised discount to customers.
“Tower used the advertised multi-policy discounts to attract and retain customers, without having systems that could reliably deliver on the promised discount.
“The FMA acknowledges that Tower self-reported the multi-policy discount Issues, cooperated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme.
“The FMA’s statutory objective is to promote and facilitate the development of fair, efficient and transparent financial markets, and to promote the confident and informed participation of businesses, investors and consumers in financial markets.
“Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists. This is why we continue to respond to fair dealing breaches like this.”
Tower 'accept and regret' impact on customers
Tower’s chairperson Michael Stiassny said in a statement: "It was pleasing that the court accepted Tower’s explanation of how the multi-policy discount errors occurred, saying that Tower had acted responsibly to address the breaches and that it was not a situation of historic system failures remaining unaddressed.
"We fully respect the FMA’s role, noting that regulatory enforcement needs to be grounded in established principles, proportionality and fairness.
"Tower acted in good faith and fully acknowledged that mistakes were made. We accept and regret the impact this has had on our customers and apologise unreservedly to those who were charged inaccurately,” he said.
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