NZ regulator takes Vero to court over premium discount failures
The Financial Markets Authority (FMA) says it has commenced legal proceedings in the Auckland High Court against Vero New Zealand over alleged multi-policy discount failures, resulting in the overcharging of $NZ8.7 million ($7.8 million) in premiums.
FMA alleges the lapses happened between April 2014 and May this year, when the Suncorp-owned insurer and its intermediaries issued invoices to about 47,000 affected customers.
Vero has reimbursed $NZ10.259 million ($9.2 million) in overcharges to affected policyholders.
In a statement released today, the regulator claims Vero contravened the fair dealing provisions of the Financial Markets Conduct (FMC) Act by incorrectly stating the premiums owed by customers who were entitled to the discounts. Multi-policy discounts apply when a customer has more than one risk or cover insured under one policy, or under multiple policies.
The regulator is seeking a declaration that Vero contravened the FMC Act and a pecuniary penalty. FMA’s claim only applies from April 2014 – the date the Act came into force though the issue dates back to 2009.
The FMA says the false and/or misleading statements were made in periodic invoices issued to affected customers in relation to house and contents, vehicle and boat insurance.
According to the regulator, Vero failed to apply the discounts due to errors and deficiencies in its systems, including data entry errors by Vero employees and some intermediaries which sold the policies on behalf of the insurer.
“The FMA alleges that liability primarily rests with Vero as it designed, owned and maintained the systems at fault,” the regulator says.
Vero reported the issue to the regulator in December 2019, at which time its remediation program had been underway for some months.
“The scale of customer harm caused by Vero’s system failures is significant and we consider Vero was slow to investigate the issue, despite even being pressured at one point by one of its intermediaries,” FMA Head of Enforcement Margot Gatland said.
“Vero was aware from 2010 that there were issues with its systems but failed to adequately recognise their magnitude.”
She says Vero’s systems were open to manual error and had no audit system to pick up the errors.
“By filing this case, we are sending a strong message that financial services firms must invest in robust systems and controls,” Ms Gatland said.
Vero New Zealand says it has stopped the issue occurring and been working proactively with its intermediaries to fully reimburse both past and present customers for any discount they were due.
However, CEO Jimmy Higgins says any negative impact on customers is unacceptable.
“We are sorry for the impact this has had on some customers,” he said. “Our priority has been to make it right for customers, and we have been working hard to contact anyone impacted, whether they still have a policy with us or not.
“We remain focused on fixing any issues we find as quickly as possible and continue to look for ways we can deliver great outcomes for customers.”
