More than 600 New Zealanders insured by IAG, Lantern, ASB, BNZ and Co-operative Bank will be paid as much as NZ$3.48 million in insurance top ups as a result of an "administrative error" brought to light by the Christchurch earthquake claims process. IAG owns State and NZI.
The blunder was reported Tuesday by the Commerce Commission which announced it had reached a settlement with IAG which admitted it might have breached the Fair Trading Act as a result of the administrative error, which also affects another 150,755 current policy holders.
The NZ$3.48 million compensation (which forms part of the settlement) relates to sum insured policies not having been inflation adjusted, in some cases for three decades.
The Commerce Commission, in a prepared release, said the sum insured adjustments were "incorrectly set below the rate of inflation."
"In fact the sum insured adjustments were incorrectly set below the rate of inflation for much of that period," the Commerce Commission reported.
As part of the settlement, IAG will also offer affected policyholders the option of either accepting an increased sum insured amount (and therefore a higher insurance premium) or agreeing to a different value.
Commerce Commission General Manager of Competition Kate Morrison commended IAG for reporting the problem in August 2011 and taking steps to put it right, but warned the "administrative error" had potentially far-reaching effects, "particularly for people at their most vulnerable, following significant personal loss.''
Affected policy holders are to be contacted directly by IAG or their broker.
Concerned policyholders can contact IAG on 0800 694 694.
Details of the settlement and a question and answer section have been posted to the Commission's website.