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27 November 2023

Medical Assurance Society New Zealand Limited (MAS)

Background 

Between 2014 to 2022, MAS: 

  • Did not apply the multi-policy discount or incorrectly applied a lower rate of the discount to premiums owed by some eligible customers. This issue affected approximately 8,864 customers, with approximately $3,318,997 in overcharged premiums.   
  • Applied an inflation adjustment of 3%, instead of the inflation adjustment specified in policies of customers who had elected to receive an inflation adjustment. This issue affected approximately 6,267 customers, with approximately $1,714,067 in overcharged premiums.   
  • Made various errors when manually calculating a customer’s benefit payments. These errors resulted in some customers receiving lower benefit payments than they otherwise would have if the errors had not occurred.  This issue affected approximately 104 customers, with approximately $1,047,059 in underpayments.  
  • Did not apply the correct no claims bonus grade to premiums owed by some eligible customers. This issue affected approximately 1,235 customers, with approximately $572,061 in overcharged premiums.  

The root cause of the breaches was related to errors and deficiencies in MAS’s systems and processes, which relied largely on manual processes.   

MAS self-reported the issues to the FMA between 2019 and 2022, including reporting one of the issues as part of the FMA and Reserve Bank of New Zealand’s Conduct and Culture reviews. MAS was aware of the multi-policy discount issue from at least 2014 but no steps were taken to investigate until the issue was rediscovered in 2019. 

MAS has repaid affected customers $6,115,271 as part of its remediation programme. 

Timeline:

November 2023

Medical Assurance Society New Zealand Limited (MAS) has been ordered to pay a pecuniary penalty of $2.1 million for making false and/or misleading representations to some customers, following proceedings brought by the Financial Markets Authority (FMA).

 

June 2023

FMA filed High Court proceedings against Medical Assurance Society New Zealand Limited (MAS) and its subsidiaries for fair dealing breaches under section 22 of the Financial Markets Conduct Act 2013 (FMC Act).

The FMA claims that between 2014 and 2022*, MAS failed to apply the correct inflation adjustments on its customer policies, failed to apply multi-policy discounts and no claims bonuses, and underpaid life and disability claims to eligible clients.