The High Court has ordered Medical Assurance Society New Zealand Limited (MAS) – the mutual society that owns insurers Medical Life Assurance Society and Medical Insurance Society – to pay a discounted penalty worth $2.1 million.
As reported earlier this year, the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko filed proceedings against MAS over breaches of the Financial Markets Conduct Act 2013. The breaches spanned miscalculating benefit payments and failing to correctly apply inflation adjustments, multi-policy discounts, and no-claims bonus discounts.
Having accepted liability and having been cooperative with the regulator, MAS was granted a 30% discount on what would have been a $3 million penalty.
“This results in a final total penalty of $2.1 million,” Justice Churchman said. “I am satisfied this is a penalty which is set at a level which denounces the conduct in which MAS was involved, and acts as a sufficient deterrent. It is also a penalty which recognises the significant public benefit of the parties having reached an agreed figure and have thereby avoided time-consuming and costly litigation.
“The final penalty is an amount which MAS says is a significant amount for it and its members but one that MAS has agreed is appropriate in all the circumstances, including in order to bring a swift and efficient resolution to this matter.”
In his judgment, Justice Churchman noted that customers are entitled to trust in the accuracy of their insurance provider’s communications in its systems but cannot do so where they must double-check pricing and invoices. MAS, due to its failings, is said to have made false and/or misleading representations to certain customers.
“MAS’s breaches were widespread across the whole of its insurance business due to fundamental flaws in the design of MAS’s systems and processes, which overtly relied on manual processes with no detective controls,” FMA enforcement head Margot Gatland commented following the penalty hearing.
“The issues caused considerable harm to a significant number of MAS’s customers, being more than 16,000 across all issues, and the harm caused by the benefits payment issue affected customers who were at particularly vulnerable times in their lives. While a relatively small insurer by market standards, the net gain MAS made from its breaches was significant.”
MAS has not issued a statement as of this writing.
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