Cigna Life Insurance NZ has admitted to making false and/or misleading representations to customers in proceedings brought by the FMA.
The case was filed in the Wellington High Court and alleges that Cigna breached the Fair Dealing provisions of the Financial Markets Conduct Act 2013 (FMC Act), when communicating and charging customers for inflation increases to premiums and cover in respect of 52,363 policies.
The case relates to Cigna’s communication of, and charging for, inflation benefits (known as “indexation”) to certain policyholders between between 1 April 2014 (when the FMC Act came into force) and early 2019.
The FMA says Cigna charged around $13.5 million in additional premiums for the increased cover that it provided and that the issue first began in early 2013 when Cigna changed its indexation rates.
The FMA states that from early 2013 until early 2019, Cigna increased customers’ premiums and cover under indexation benefits, on a variety of life insurance policies, using flat rates of indexation that significantly exceeded the CPI, and which were not set with reference to the CPI or the fixed rates contained in customers’ policies, as was required under the relevant policies. The company communicated these changes to customers on an opt out basis, through annual policy notification letters.
Cigna has admitted to contravening the Fair Dealing provisions of the FMC Act (section 22) and has filed a Notice of Admissions in the High Court. The matter will proceed to a penalty hearing before the Court where the FMA will seek declarations of contravention, and the parties will submit that Cigna should be ordered to pay a pecuniary penalty.
Cigna responds
In a statement, Cigna’s CEO Gail Costa says the issue raised by the FMA is historical and impacts “…some Cigna policies that were inforce prior to the purchase of OnePath”.
“The Assurance Extra product range is not impacted,” she says. “This issue was self-reported by us to the FMA following an internal review in 2019.
“The FMA has acknowledged that it was not our intention to mislead customers. Since the issue was discovered, we’ve been contacting impacted customers to ensure they have the right cover for their needs.
“Where they haven’t, we’ve offered the option of a refund and lower cover. More than three quarters haven chosen to keep their cover as is. Collectively these customers have benefitted from a significant amount of additional cover without the need for any medical or risk assessment.
“We’ve kept the FMA informed of everything we’ve done, and we’re pleased that our customers continue to see the value of the services we provide.”