New Zealand general insurer Tower has been ordered to pay a penalty amounting to NZ$7m ($4m) for misleading representations that resulted in more than NZ$11m in overcharges to its customers.
A media release by the Financial Markets Authority (FMA) said that the NZ$7m penalty follows admissions in civil proceedings brought by the FMA at the High Court in Auckland after Tower self-reported the issue to the authority in March 2021.
In its submission, Tower admitted it breached the Financial Markets Conduct Act by misleading customers in its invoices about its multi-policy discount (MPD) offer since 10 September 2016, resulting in the overcharges. This overcharging continued until February 2025. Tower has also admitted to making false or misleading representations in marketing material in relation to MPDs.
The breach arising from the false or misleading representations in its invoices affected approximately 61,000 customers (approximately 90,200 policies). These formed approximately 11% of Tower’s total customer base. Tower has carried out remediation and repaid over NZ$11.7m.
For more than two decades, Tower offered a MPD to customers holding multiple qualifying insurance policies. In 2017, Tower entered into a settlement agreement with the Commerce Commission under which Tower agreed to fix its policy system, which had caused a historic issue resulting in the miscalculation of MPD.
Justice O’Gorman said, “The FMA is justifiably critical that the previous settlement was intended to ensure that Tower sufficiently invested in and maintained adequate systems and processes to ensure any MPD is applied correctly, including through any migration process.”
FMA’s Head of Enforcement Margot Gatland said, “Tower’s issues stemmed from deficiencies in its systems that meant the insurer failed to deliver to customers a publicly advertised discount.
“Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount. The FMA acknowledges that Tower self-reported the MPD Issues, cooperated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme.”
Ms Gatland said, “Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists. This is why we continue to respond to fair dealing breaches like this.”