General insurer Tower has been ordered to pay a $7 million penalty for misleading representations that resulted in more than $11 million in overcharges to its customers.
A statement from the FMA says the $7 million penalty follows admissions in civil proceedings brought by the authority at the High Court in Auckland after Tower self-reported the issue to the FMA in March 2021.
The authority says Tower admits it breached section 22 of the Financial Markets Conduct Act by misleading customers in its invoices about its multi policy discount (MPD) offer since 10 September 2016, resulting in the overcharges.
It says this overcharging continued until February 2025. Tower has also admitted to making false or misleading representations in marketing material in relation to MPDs.
…the breach arising from the false or misleading representations in its invoices affected approximately 61,000 customers…
The FMA says the breach arising from the false or misleading representations in Tower’s invoices “…affected approximately 61,000 customers (or approximately 90,200 policies); approximately 11% of Tower’s total customer base.”
It adds that Tower has carried out remediation and repaid over $11.7 million.
“For more than two decades, Tower offered a MPD to customers holding multiple qualifying insurance policies.
“In 2017, Tower entered into a settlement agreement with the Commerce Commission under which Tower agreed to fix its policy system which had caused a historic issue resulting in the miscalculation of MPD.”
The statement says that Justice Gorman accepted “the FMA is justifiably critical that the previous settlement was intended to ensure that Tower sufficiently invested in and maintained adequate systems and processes to ensure any MPD is applied correctly, including through any migration process.”
Margot Gatland, FMA’s Head of Enforcement says Tower’s “…issues stemmed from deficiencies in its systems that meant the insurer failed to deliver to customers a publicly advertised discount.
“Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount.”
…Tower self-reported the MPD Issues, co-operated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme…
She says the FMA acknowledges that Tower self-reported the MPD issues, co-operated 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,”she says.