FMA takes Suncorp's Vero Insurance to court for overcharging

The Financial Markets Authority has filed high court proceedings against Vero Insurance New Zealand after the insurance provider failed to apply multi-policy discounts and overcharged customers by $8.7 million.

Vero Insurance is owned by Suncorp NZ – which also owns Asteron Life and is part of AA Insurance.

The Financial Markets Authority (FMA) claimed that Vero breached the fair dealing provisions of the Financial Markets Conduct Act by “incorrectly stating” the multi-policy premiums owed by customers were entitled to discounts.

Multi-policy discounts apply when a customer has more than one risk or cover insured under one policy – or under multiple policies.

'Periodic invoices'

The misleading statements were made in “periodic invoices” which were issued to customers who had house and contents, vehicle and boat insurance, the FMA said.

The FMA alleged that between April 2014 and May 2022, Vero issued invoices to about 47,000 affected customers which resulted in the overcharging of $8.7m in premiums.

Vero reported the issue to the FMA in December 2019 and, at the time, the insurer’s remediation programme had been under way for some months. 

But the FMA said Vero hadn’t “fully reviewed all affected intermediary channels” and told Vero to do a full investigation and remediation plan. During this process, the insurer discovered even more affected customers.

The FMA’s head of enforcement, Margot Gatland, said the scale of customer harm caused by Vero’s system failures was “significant” and that the FMA viewed Vero as being slow to investigate the issue – even after being pressured at one point by its intermediaries.

She said Vero had been aware from as early as 2010 that there were issues with its systems but had failed to adequately recognise the magnitude of their issues.

“Vero’s systems were open to manual error and it had no audit system to pick up these errors,” she said in a statement. “By filing this case, we are sending a strong message that financial services firms must invest in robust systems and controls.”

'Unacceptable'

The FMA said Vero had been “cooperative” with the regulator through its investigation since disclosing the issue and it was seeking a declaration that Vero had contravened the act and a pecuniary penalty. 

Vero chief executive Jimmy Higgins said any negative impact on customers – however it was caused – was “unacceptable”.

“We are sorry for the impact this has had on some customers,” he said in a statement. 

“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.”  

Higgins said Vero remained “focused” on fixing any issues that the insurer found “as quickly as possible”.

Vero isn’t the only insurer that’s been pinged by the FMA this month. 

In early October, NZ’s largest life insurer, AIA, was ordered by the high court in Auckland to pay a $700,000 penalty for making misleading representations to some customers. 

The FMA said that as of September, life insurers had repaid almost half a million customers more than $43m as a result of its 2018 conduct and culture review.