General insurer Tower has been ordered to pay a $7 million penalty for misleading representations, affecting 61,000 customers and leading to overcharges of more than $11 million.
In March 2024, the Financial Markets Authority (FMA) announced it had filed civil proceedings against Tower at the High Court in Auckland for failing to apply multi-policy discounts to eligible customers’ premiums leading to overcharges.
Tower self-reported the issue to the FMA in March 2021.
The FMA said Tower had admitted it had breached the Financial Markets Conduct Act by “misleading customers in its invoices about its multi-policy discount 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 multi-policy discounts.”
This affected about 90,200 policies, which is about 11% of the general insurer’s total customer base, the FMA said.
“Tower has carried out remediation and repaid over $11.7 million,” the FMA said.
And “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 multi-policy discounts (MPDs)”, the FMA said.
In July, Tower announced it was ending its multi-policy discounts, with its chief executive Paul Johnston saying at the time: "Over the past few years, we have made investments in system upgrades and process improvements, with the aim of eliminating any risk of errors in calculating and applying the appropriate multi-policy discount.”
"However a risk remains that some customers might not receive the correct discount. That’s not good enough, so we have made the decision now,” Johnston said in July.
On the NZX, Tower said both the company and the FMA agreed that "these contraventions were the result of failures in systems and processes, not management decisions".
"Tower has undertaken a comprehensive multi-policy discount remediation programme to compensate affected customers which is now nearing completion," Tower said on Tuesday.
"Once complete, Tower will have paid around $12m to affected customers including interest.
"Tower has also made significant investments in improving its systems and processes and is removing the multi-policy discount from its insurance offerings."
‘Deficiencies in its systems’
The FMA said Justice Laura O’Gorman, who presided over the civil court case, accepted that “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.”
The 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,” Gatland said.
“The FMA acknowledges that Tower self-reported the MPD Issues, co-operated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme.”
Gatland said: “The FMA’s statutory objective is to promote and facilitate the development of fair, efficient and transparent financial markets, and to promote the confident and informed participation of businesses, investors and consumers in financial markets.”
“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.”
'Accept and regret'
Tower chairman Michael Stiassny said: “It was pleasing that the Court accepted Tower’s explanation of how the MPD errors occurred, saying that Tower had acted responsibly to address the breaches and that it was not a situation of historic system failures remaining unaddressed.
"We fully respect the FMA’s role, noting that regulatory enforcement needs to be grounded in established principles, proportionality and fairness," Stiassny said.
“Tower acted in good faith and fully acknowledged that mistakes were made. We accept and regret the impact this has had on our customers and apologise unreservedly to those who were charged inaccurately,” he said.
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