The case centered on IAG’s admission that it made false or misleading representations
Auckland’s High Court has fined IAG New Zealand Ltd a record $19.5 million for systemic failures that led to widespread overcharging of insurance customers.
In a decision handed down on October 3, 2025, in Financial Markets Authority v IAG New Zealand Ltd [2025] NZHC 2908, Justice Andrew approved a penalty jointly recommended by the Financial Markets Authority (FMA) and IAG, New Zealand’s largest insurer. The case centered on IAG’s admission that it made false or misleading representations and failed to correctly apply discounts or premiums, in breach of the Financial Markets Conduct Act 2013 (FMCA).
The court found that, between September 2021 and December 2024, IAG self-reported 41 issues to the FMA, with eight causes of action forming the basis of the regulator’s investigation. These failures, which spanned multiple brands and distribution partners, included not applying multi-policy discounts, no-claims bonuses, and other advertised benefits. As a result, at least 250,000 customers were overcharged approximately $35 million in premiums and levies after 1 April 2014.
Justice Andrew described IAG’s conduct as “the most wide-ranging and extensive failures seen in any other cases that have come before the Court under pt 2 of the FMCA.” The judgment noted that IAG’s systems relied heavily on manual processes, lacked adequate quality assurance, and failed to promptly address known issues—some of which persisted for close to a decade.
The court highlighted IAG’s dominant market position, stating that the company “insures almost one out of two households and businesses in New Zealand.” Customers, the judgment said, were entitled to trust the insurer’s systems and representations, especially given IAG’s scale and resources.
The judgment also acknowledged IAG’s comprehensive remediation programme, which included refunding affected customers and investing in improved systems. Deloitte’s independent assessment in August and September 2024 found IAG’s processes appropriate to prevent recurrence and deliver suitable compensation, though some residual risks remained.
While the court found no evidence that IAG’s conduct was intentional or deliberate, it described the failures as “careless,” with significant delays in reporting issues to the FMA. The penalty, after a 35 percent discount for IAG’s self-reporting, cooperation, and remediation efforts, was set at $19.5 million—the highest individual penalty imposed for breaches of s 22 of the FMCA to date.
Justice Andrew concluded that the penalty “satisfies the objectives of the FMCA and reflects the particular circumstances of this case,” and ordered that the penalty be applied first to the FMA’s costs in bringing the proceedings.
The case underscores the importance of robust systems and compliance in New Zealand’s financial sector, sending a clear message to large institutions about the consequences of systemic failures—even when not deliberate.
