The pecuniary penalty is worth $2.1 million in total
Medical Assurance Society New Zealand Limited (MAS), an insurance and investment company, is set to pay a pecuniary penalty worth $2.1 million following proceedings brought by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko.
The penalty came from the MAS’ actions of making false and misleading representations to some of its customers. MAS admitted that it went against section 22, one of the fair dealing provisions of the Financial Markets Conduct Act 2013 (FMCA), last September.
The firm said that it failed to correctly apply multi-policy discounts and no claims bonus discounts to some customers who were eligible to receive them, failed to properly apply inflation adjustments to some customer policies, and miscalculated benefit payments.
“MAS’s breaches were widespread across the whole of its insurance business due to fundamental flaws in the design of MAS’s systems and processes, which overtly relied on manual processes with no detective controls,” said Margot Gatland, the FMA head of enforcement.
“The issues caused considerable harm to a significant number of MAS’s customers, being more than 16,000 across all issues, and the harm caused by the benefits payment issue affected customers who were at particularly vulnerable times in their lives,” added Gatland.
Justice Peter Churchman declared that MAS breached section 22 of the FMCA and imposed a pecuniary penalty with a starting point of $3 million, a discount of 30 percent, and a final penalty of $2.1 million during the penalty hearing conducted this week.
“The making of false and misleading representations, and any associated overcharging, undermines the purposes of the FMCA in promoting confident participation of consumers and facilitating the development of transparent financial markets,” said Churchman.
“Customers are entitled to trust in the accuracy of their insurance provider’s communications in its systems but cannot do so where they must double check pricing and invoices (particularly where, as is the case here, customers could not verify whether amounts charged or benefits paid were correct),” he added.
The breaches have mainly been attributed to errors and deficiencies in MAS’ systems and processes, which were heavily reliant on manual processes. While MAS self-reported to the FMA between 2019 and 2022, it knew about the issues in its multi-policy discounts since at least 2014 but made no move to investigate until the rediscovery of the issues in 2019.
As part of its remediation programme, MAS has repaid its affected customers a total of $6,115,271.