Insurers acknowledge misleading representations for some products
After an investigation by the Financial Markets Authority (FMA), FMG Insurance Limited and Farmers’ Mutual Group (together, FMG) admitted to misleading statements for some of its insurance products and breaches of fair dealing provisions of the Financial Markets Conduct Act 2013 (FMC Act).
According to the FMA’s media release, FMG remediated customers and agreed to pay $2.1m, in place of a pecuniary penalty, via an enforceable undertaking.
Margot Gatland, the FMA’s enforcement head, shared that FMG has been cooperative. She also acknowledged FMG’s commitments, through the enforceable undertaking, to improve systems and adjust the wording of policies to prevent the problems from repeating.
“Insurers must ensure their representations to customers about cover, premiums, adjustments, and policy benefits are accurate, clear, and consistent with policy terms,” Gatland said in the FMA’s media release.
After FMG self-reported issues, the FMA investigated the matter.
“Following our investigation, we determined that FMG’s representations to customers were false or misleading and caused customer harm,” Gatland said.
The FMA’s media release discussed the findings of its investigation, which focused on two issues:
From 2012–24, FMG charged some customers with Household Contents policies additional premiums for specified items. The FMA found that the sums insured already covered those items, which meant that the specified items provided no additional benefits.
FMG admitted to its misleading representations regarding the need to specify items and the additional cover for customers, in breach of ss 22(d) and 22(g) of the FMC Act.
“The FMA will continue to prioritise fair customer outcomes and take action where misleading conduct occurs in the financial services sector,” Gatland said in the media release.
According to the FMA, this issue impacted 3,904 customers from 1 April 2014 to 2024. FMG remediated customers for overcharged premiums totalling about $1.936m, including goods and services tax (GST) and use of money interest.
FMG also made five claims for top-up payments amounting to around $6,000, including GST.
From 2013–24, FMG applied annual flat rate increases to some customers’ sums insured, even where the policies indicated that these adjustments would be inflation-based or no longer included an inflation clause.
The FMA found these adjustments inconsistent with policy wording, leading to overcharging or undercharging 54,642 customers from 1 April 2014 to 2024. Due to overcharged premiums, 26,000 customers needed a refund. Additionally, 480 customers paid claim top-up payments.
FMG admitted to false or misleading representations – in breach of ss 22(d), 22(f), and 22(h) of the FMC Act – through its:
For this issue, FMG remediated the affected customers for a total amount of around $3.38m, including GST and use of money interest.
