Timeline
September 2022
The Auckland High Court has ordered life insurer AIA to pay a pecuniary penalty of $700,000 for making false and/or misleading representations to some customers, following proceedings brought by the FMA.
AIA admitted to the conduct last year in court. The FMA and AIA agreed a penalty of $700,000 reflected the seriousness of the breaches. In his judgment, Justice Michael Robinson was satisfied a penalty of this amount was appropriate, taking into account AIA’s:
- admissions
- self-reporting
- cooperation during the FMA’s investigation
- thorough remediation in compensating customers
- system errors being unintentional
In bringing these proceedings, the FMA sought to denounce the misconduct, and hold AIA accountable for the breaches and any harm caused to the 383 affected customers, who were overcharged (or had claims underpaid by) more than $413,000. The FMA also wanted to deter financial institutions from having deficient processes or systems.
The Judge declared that AIA had breached Fair Dealing provisions (Part 2) of the Financial Markets Conduct Act 2013 (the FMC Act) in that AIA made false and/or misleading representations in relation to customers insurance policies.
The FMA case was based on three core breaches by AIA regarding incorrect and misleading communication to customers holding various life insurance and associated policies:
- purported benefits had been automatically added to customer policies when they had not
- charging premiums after the termination of a policy and treating policies as terminated when they should have remained in force, and,
- incorrect inflation adjustments.
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AIA acknowledged its “system failures should not have occurred and should have been remedied more promptly. AIA has now made significant investment to ensure these issues do not reoccur.”
In relation to general deterrence, the Judge accepted the FMA’s submission that where breaches arise from deficient processes or systems the penalty should deter other market participants from risking similar deficiencies.
July 2021
AIA admitted making false and/or misleading representations to customers in proceedings brought by the FMA. The Auckland High Court and alleges three causes of action under the Fair Dealing provisions (Part 2).
