The action centres around claims that Tower may have not fully adhered to the Financial Markets Conduct Act (FMC Act), particularly section 22, by not accurately representing its multi-policy discount scheme to customers since Sept. 10, 2016. This situation is reported to have adversely affected some 65,000 policyholders across 81,200 insurance policies.
For more than two decades, Tower has promoted a scheme where customers holding two or more eligible insurance policies would receive a discount. Despite this, the FMA asserts that Tower did not consistently apply these discounts as promised in their marketing communications and policy documentation.
The FMA's case further alleges that Tower's marketing communications failed to clearly state that the discount was applicable only to certain policies and that it would not be automatically applied at the time of a new policy purchase. These issues are attributed to significant shortcomings in Tower's IT systems and an overall lack of effective management controls.
FMA head of enforcement Margot Gatland said the proceedings reflect a broader issue within the insurance sector concerning inadequate investment in the necessary systems and governance to ensure errors are detected and corrected promptly, with timely remediation for affected customers.
“These proceedings are another example of where an insurer has failed to invest in the systems, controls, or governance processes to ensure that where errors occur, they are picked up quickly and fixed, and customers are remediated in a timely way. A significant number of customers have been overcharged over a long period as a result of Tower's failure to address these problems,” she said.
As part of its response to the allegations, Tower has already undertaken remediation efforts for about 58,000 customers, distributing refunds totalling $9.26 million.
The FMA is now seeking a court declaration that Tower's actions constituted a breach of the FMC Act and is asking for a financial penalty to be imposed on Tower, payable to the Crown. This legal challenge was officially lodged in the High Court in Auckland, signalling a notable development in the enforcement of financial market conduct standards within New Zealand's insurance industry.
Last month, the FMA announced the successful prosecution of a former financial adviser, who admitted to multiple offences.
