IAG New Zealand has been penalised $NZ19.5 million ($17.2 million) for pricing failures that affected about 269,000 customers.

The High Court in Auckland ordered the pecuniary penalty payment after the Financial Markets Authority launched civil proceedings in April.

IAG breached financial conduct laws by failing to correctly price premiums charged and failing to correctly apply important discounts to insurance products sold via its business divisions and distribution partners, the authority said today. 

“IAG is New Zealand’s largest insurer,” FMA executive director for response and enforcement Louise Unger said. “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 time frame.”

She says the penalty “sends a clear message to the financial market … as to the importance of investing in robust systems and making good on the promises made to customers. 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.”

IAG self-reported the breaches after the FMA undertook a review of insurers. The breaches it has admitted resulted in overcharges of $NZ35 million ($30 million).

The insurer says it recognises it made mistakes, and it has invested heavily in new systems and processes as they became available.

“Since self-identifying these issues, our priority has been to put things right for impacted customers, offering a sincere apology and issuing refunds,” New Zealand CEO Amanda Whiting said.

“We are doing everything to prevent these issues happening again. The underlying issues have been fixed, and all affected customers’ repayments were completed earlier this year.”