Cigna Life Insurance New Zealand Limited (Cigna New Zealand) has been ordered by the Wellington High Court to pay $3,575,000 for making false and/or misleading representations to policyholders.
The enforcement case, which was initiated last year by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko, related to Cigna NZ’s communication of, and charging for, inflation benefits to customers holding 52,363 policies between April 2014 and early 2019. During the period, the company increased premiums and cover while communicating the changes on an opt-out basis.
April 2014 was when the Financial Markets Conduct Act 2013 – the fair dealing provisions of which were breached by the life insurer – came into force. Cigna NZ, prior to the penalty hearing last October, admitted to having violated the provisions.
Now, as announced by the FMA, Justice Mallon has issued her judgment, ordering Cigna NZ to pay a final pecuniary penalty of nearly $3.58 million.
In Justice Mallon’s judgment, she stated: “Cigna acknowledges that providers of financial services, including insurers, have a special relationship of trust with their customers. It also acknowledges that customers are entitled to trust that Cigna will be clear and transparent in its communications with its customers.
“While customers obtained increased cover from Cigna’s conduct, it is not for Cigna to decide this for customers without being clear and transparent about the basis for the increase… Cigna’s conduct was not the result of a systems error. It was the result of decisions made by senior management.”
Commenting on the ruling, FMA enforcement head Margot Gatland highlighted that the penalty is the biggest they have secured in an enforcement case.
“Cigna’s conduct affected many of its customers, who trusted the firm to be transparent and look after their interests,” declared Gatland. “This judgment sends a strong message to the industry that firms need to give due regard to customers’ interests, including when making pricing changes and communicating them.”
