The Financial Markets Authority (FMA) has issued a public warning to Aioi Nissay Dowa Insurance (AIOI) for failing to apply advertised discounts to motor vehicle insurance customers, resulting in overcharges of almost $700,000 to 5,055 customers over nine years.
The insurance company’s manual processes failed to identify customers eligible for multi-vehicle and multi-policy discounts on comprehensive vehicle insurance, payment protection insurance (PPI), and vehicle business fleet insurance policies sold through dealerships and online.
AIOI’s New Zealand subsidiary notified the FMA in March 2024 after discovering the discount issue, self-reporting the matter three days after becoming aware of the problem.
FMA Executive Director of Response and Enforcement Louise Unger says the failures contravened fair dealing provisions under the Financial Markets Conduct Act.
“Manual processes used to identify customers with more than one policy failed and customers eligible for discounts were not identified. This resulted in AIOI issuing incorrect invoices and contravening the fair dealing provisions set out in Part 2 of the FMC Act, with a significant number of customers impacted by the issue,” Unger says.
Industry expectations and oversight
Unger says customers should expect fair treatment and that advertised promises will be honoured.
“We expect financial institutions to invest in quality systems and controls that enable them to deliver on advertised promises and to also identify issues and be capable of resolving those issues effectively and quickly,” she says.
“We also expect that financial institutions are proactively reviewing their products and services to ensure that they perform in the way they are described.”
The FMA has repeatedly communicated expectations around accurate and transparent premium administration, but continues to encounter issues with incorrectly applied discounts and premiums.
“Over the past several years, the FMA has clearly communicated its expectations around ensuring premiums are accurate, transparent, and administered correctly. However, we continue to encounter issues with discounts and premiums not being correctly applied,” Unger says.
Company response and remediation
Despite the significant customer impact, the FMA found no evidence of deliberate misconduct, attributing the issue to poor controls or ineffective systems.
AIOI has taken steps to identify all affected policyholders, notify them, and make remediation payments. The company has also implemented measures to prevent the issue recurring.
“In this case, AIOI acted responsibly in notifying FMA at its earliest opportunity, self-reporting the matter three days after it became aware of the issue. They have taken proactive steps to identify all affected policy holders, notify them and make remediation payments,” Unger says.
The FMA determined a public warning was appropriate given the circumstances and the company’s cooperative response to addressing the failures.
