IAG Fined Record $19.5 Million for Misleading Nearly 240,000 Customers

New Zealand’s largest insurer, IAG, has been hit with a record $19.5 million penalty after admitting to overcharging 239,000 customers a total of $35 million by failing to apply promised discounts and benefits. Reported by RNZ

The High Court imposed the fine following legal action by the Financial Markets Authority (FMA), which found that IAG had breached its obligations by not delivering multi-policy discounts through its AMI, State, NZI brands and policies sold via major banks.

Louise Unger, FMA’s executive director of response and enforcement, said IAG’s failures were the most extensive the regulator had seen.

“IAG is New Zealand’s largest insurer. It is a large and sophisticated market leader and accordingly plays a vital role in upholding market standards,” Unger said. “Yet its significant underinvestment led to widespread failures of its systems and processes, to the detriment of its customers.”

She added that IAG also failed to respond to and report issues in a timely manner, with the court describing the scale and delay of the breaches as “the most aggravating feature” of the company’s conduct.

The failings, some dating back more than 20 years, were attributed to outdated systems and poor internal oversight.

IAG Apologises and Refunds Customers

IAG’s New Zealand chief executive Amanda Whiting acknowledged the company’s “historic mistakes.”

“Since self-identifying these issues, our priority has been to put things right for impacted customers, offering a sincere apology and issuing refunds,” Whiting said. “We are doing everything to prevent these issues from happening again.”

She confirmed that all refunds to affected customers were completed earlier this year. When the problem was first uncovered, IAG also found that a number of customers had been undercharged.

Broader Crackdown on Financial Misconduct

IAG’s penalty is part of the FMA’s wider enforcement action across New Zealand’s financial sector, which has already seen ANZ, Kiwibank, Westpac, and other finance and insurance companies fined millions of dollars.

The FMA said its investigations and court actions in recent years have resulted in more than 1.5 million customers being repaid around $215 million in total.