MR No. 2021 – 36
Life insurer AIA has admitted making false and/or misleading representations to customers in proceedings brought by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko.
The case was filed in the Auckland High Court and alleges three causes of action under the Fair Dealing provisions (Part 2) of the Financial Markets Conduct Act 2013 (the FMC Act).
AIA has agreed to admit all causes of action and will file a Notice of Admission of the breaches in the High Court. The matter will proceed to a penalty hearing before the High Court where the FMA will seek declarations of contravention, and where the parties will submit that AIA should be ordered to pay a pecuniary penalty of $700,000.
The FMA case is based on three core breaches regarding incorrect and misleading communication to customers holding various life insurance and associated policies:
AIA self-reported the breaches to the FMA, when asked to provide information as part of the joint FMA/Reserve Bank of New Zealand conduct and culture review of life insurers in 2018. AIA has told the FMA that remediation for affected customers has been completed, and the FMA will be seeking confirmation of this as part of the process.
In deciding to bring this action, the FMA took into account a number of factors, including AIA’s self-reporting, its remediation efforts, the nature of the alleged misconduct, and the number of affected customers.
The FMA considered the seriousness of the breaches, and the length of time it has taken to deal with impacted customers, warranted enforcement action. The FMA is determined to hold such misconduct to account and send a strong message of deterrence to the market. The FMA case only captures breaches that occurred from 1 April 2014 – when the FMC Act came into force – but some breaches occurred prior to this and continued after the Act came into effect.
Karen Chang, FMA Head of Enforcement, said: “Consumers’ trust in the integrity of their life insurance provider is paramount for the industry to be effective. This case demonstrates that firms providing critical insurance must ensure they have necessary systems and controls in place to perform their core business and manage their customers’ policies correctly.
“The customers affected by the passback benefits issue will have undergone a traumatic and lifechanging event before making a claim. AIA’s behaviour exacerbated and prolonged the harm to customers who were already in vulnerable circumstances. They took out insurance to reduce stress and financial impact in a time of significant hardship and uncertainty, but when they needed the cover they had been told they had, it was denied. Moreover, AIA would not pay out until much later,” said Ms Chang.
The FMA acknowledges that because AIA admitted the breaches at an early stage, the matter will now proceed directly to a penalty hearing before the High Court and avoids the necessity and cost of a trial.
The FMA will apply for orders that the pecuniary penalty be first applied to meet the FMA’s actual costs in bringing the proceeding.