Insurer did not deliver reliably on promised multi-policy discount: FMA enforcement head
The High Court imposed on Tower Ltd, a New Zealand-based and NZX-listed general insurer, a $7m pecuniary penalty upon determining that its conduct contravened ss 22(d), (f), and/or (h) of the Financial Markets Conduct Act 2013 (FMCA).
In Financial Markets Authority v Tower Ltd [2025] NZHC 3771, the defendant Tower offered a multi-policy discount (MPD) to customers with numerous qualifying insurance policies. Those with two policies received a 10 percent discount, while those with three or more got 20 percent.
According to the court, the case involved three categories of breaches.
First, from September 2016 to February 2025, Tower failed to apply the MPD correctly to 90,198 policies held by 60,941 customers, resulting in overcharges on affected invoices totalling around $11m. The court attributed the failures to manual errors, system migration issues, duplicate customer records, software failures, and other systems and process deficiencies.
Second, until October 2022, Tower’s marketing materials falsely represented that it would apply the MPD immediately upon the purchase of a second or third eligible policy, when it only applied the discount at renewal.
Third, on 27 July 2020, a Facebook post incorrectly provided that customers would receive a 20 percent MPD when taking out two or more policies. However, the actual requirement for the 20 percent discount was three or more policies.
Tower discovered a potential problem in September 2020 and self-reported the MPD misapplication to the Financial Markets Authority (FMA) | Te Mana Tātai Hokohoko in March 2021. Investigations showed a problem more widespread than initially assumed.
“Tower’s issues stemmed from deficiencies in its systems that meant the insurer failed to deliver to customers a publicly advertised discount,” said Margot Gatland, FMA’s enforcement head, in a media release.
“Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount,” Gatland added.
A High Court hearing revolved around the appropriate civil penalty for Tower’s misrepresentation and misapplication of its MPD in marketing and supplying insurance services between September 2016 and February 2025.
As of 20 February 2025, Tower has paid more than $11.7m in remediation, including interest, to impacted customers. Tower made efforts to implement a remediation program, engage external consultants, and improve its systems and processes.
“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 in the FMA’s media release.
The High Court of New Zealand declared that Tower contravened ss 22(d), (f), and/or (h) of the FMCA by issuing the misleading Facebook post and marketing materials, as well as the affected invoices between September 2016 and February 2025.
Together, the FMA and Tower recommended a $7m pecuniary penalty. This amount reflected a $10m starting point, with a 30 percent reduction for mitigating factors.
The court imposed the proposed $7m penalty under s 489(2) of the FMCA upon finding that it met the FMCA objectives, reflected the circumstances of this case, and fell within the appropriate range.
The court also issued an order under s 493 of the FMCA to apply the penalty first to the FMA’s costs in commencing the proceedings.
“Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists,” Gatland said in the FMA’s media release. “This is why we continue to respond to fair dealing breaches like this.”
