According to Cigna New Zealand it has long since put behind it the woes that related to the life insurer’s discontinued credit card repayment insurance (CCRI) proposition, even before it offered an enforceable undertaking to the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko over regulatory shortcomings.
As revealed this week, Cigna Life Insurance New Zealand Limited and OnePath Life (NZ) Limited – businesses wholly owned by Cigna New Zealand Holdings Limited – have agreed to pay a combined $180,000 for their role in breaching the fair dealing provisions of the Financial Markets Conduct Act 2013 (FMCA) by way of failing to ensure that distributor ANZ Bank New Zealand Limited was correctly delivering their policies.
In the enforceable undertaking seen by Insurance Business, it was noted: “ANZ arranged for a number of its customers who held CCRI policies to be provided with one or more additional CCRI policies (each a duplicate policy) between a) April 01, 2014, and April 30, 2018, the insurer for 152 of those policies was OnePath; and b) May 01, 2018, and August 23, 2019, the insurer for 80 of those policies was Cigna.
“ANZ prepared account statements for the customers who had been provided with duplicate policies. The account statements for the duplicate policies contained representations that: a) the duplicate policies were capable of conferring benefits additional to those conferred by the customer’s original policy, when they did not (in breach of s22(d) of the FMCA); and b) ANZ was entitled to charge the premiums that appeared in those statements in respect of the duplicate policies, when it was not (in breach of s22(h) of the FMCA).”
Similarly, for a period between 2014 and 2018, ANZ arranged for certain customers to be provided with Cigna or OnePath CCRI policies even though they were not eligible on account of their age. The bank also prepared account statements for these customers with ineligible policies, and the representations were that the policies were valid and that ANZ was entitled to charge the corresponding figures, again in breach of the legislation.
“Cigna NZ and OnePath have admitted to historic breaches of the Financial Markets Conduct Act in relation to legacy credit card repayment insurance policies,” Cigna told Insurance Business. “All impacted customers were contacted, and the issues put right in early 2020. The companies no longer sell credit card repayment insurance and have put systems and processes in place to remedy the problem and to ensure it continues to deliver good customer outcomes for existing policyholders.”
While Cigna – which completed its integration of OnePath from ANZ in 2020 – itself did not make misleading representations to policyholders, and neither did OnePath, the two admitted liability under the FMCA provision that can deem providers to be liable for agents’ conduct in certain situations. The idea is that there should have been better product oversight even while the policies were being distributed by a third party.
Last year, the Auckland High Court ordered ANZ to pay a civil penalty to the tune of $280,000 for its misleading representations to 307 customers insured by OnePath and Cigna. The cases relating to the duplicate and ineligible policies were the first civil proceedings brought by the FMA under the provisions on fair dealing in Part 2 of the FMCA.
ANZ, which first identified the duplicate policy issue in 2017 and the ineligible customers issue in 2018, did not disclose either of the CCRI issues to the regulator or the Reserve Bank of New Zealand during their joint review of the conduct and culture of retail banks in the country. It wasn’t until 2019 when the lender first notified the FMA of both issues.
Meanwhile, the undertaking that was signed by Cigna NZ chief executive Gail Costa included a so-called “record of commitment” by the insurer.
“Cigna also records its commitment to developing and maintaining effective policies, systems, and processes to support good customer outcomes and to prevent issues of the kind referred to in these undertakings from occurring in the future,” reads the five-page document, which indicates that Cigna and OnePath have 10 working days, from when the undertaking becomes effective, within which to pay the $180,000 penalty for the historic breaches.
OnePath, which operated in New Zealand from 2001 and exited the market when it was snapped up by Cigna, is no longer a licensed insurer and did not offer the same abovementioned commitment.
