As previously reported, the FMA filed the case to seek (one) a declaration that Vero contravened the Financial Markets Conduct (FMC) Act by incorrectly stating the premiums owed by customers who were entitled to multi-policy discounts and (two) a pecuniary penalty.
At this week’s penalty hearing, Justice Venning stated that the Suncorp-owned insurer failed to carry out a key aspect of its bargain with policyholders – charging the right amount – and that no adequate explanation for the failure not to have detected the issue earlier had been given.
It was declared that Vero breached section 22 of the FMC Act. The original penalty was $6 million but a 35% discount was applied.
“This penalty is the largest the FMA has secured in a case of this kind which reflects the seriousness of the deficiencies in Vero’s systems that affected many customers over a prolonged period,” FMA enforcement head Margot Gatland said in a release.
“It reinforces the importance to firms of the need to invest properly in systems that deliver benefits promised to customers and should remind the industry that financial institutions will be held to account if they fail to sufficiently invest in systems, controls, and processes that ensure all customers are treated fairly.”
Meanwhile, in a statement sent to Insurance Business, Vero thanked its intermediary partners and brokers for their work in ensuring that all impacted customers were remediated.
The insurer said: “The fine issued by the High Court this week stems from a previously reported systems and process issue in Vero’s distribution network that we made the FMA aware of in 2019.
“We discovered the systems issue through our own review process, launched a full investigation, and reported the issue to the FMA. This investigation also revealed that this same systems issue meant that a significantly larger number of customers were found to have been undercharged. Vero took no steps to reclaim these undercharge losses.
“We have and always will make things right where we have made a mistake. Since identifying the issue and making the FMA aware of it in 2019, our priority has been to put things right for impacted customers.”
Both past and present policyholders that were entitled to the discount have been fully reimbursed, with interest, through Vero’s remediation efforts that involved the company’s distributing partners and intermediaries.
What do you think about this story? Share your thoughts in the comments below.
