AIA fined $700,000 for misleading customers

The insurer last year admitted three causes of action brought under the Financial Markets Conduct Act 2013 after the Financial Markets Authority (FMA) filed proceedings, seeking declarations from the High Court and a financial penalty. A penalty hearing took place in February.

The issues included:

• passback benefits, where AIA wrongly told certain customers they were entitled to certain enhancements on an existing policy without clarifying that the benefits applied only to post-2003 policies. The information customers received in anniversary letters misrepresented the benefits and, in some cases, misled them about their policies. The passback benefits related to cover for conditions such as critical cancer, Alzheimer’s disease, intensive care treatment and heart valve replacement.
• termination date issues, where AIA continued to charge premiums when customers had no cover. It also ceased cover for certain customers while their policies remained in force, resulting in some customers, whose claims had been accepted, being underpaid on those claims.
• inflation adjustment, where AIA applied incorrect inflation adjustments to premiums, meaning some customers were charged excess premiums.

Margot Gatland, the FMA’s head of enforcement, says the outcome makes it clear that financial institutions will be held to account if they fail to invest sufficiently in systems, controls and processes that ensure all customers are treated fairly.

“AIA accepts that customers should be able to rely on the robustness of their insurer’s systems. AIA ‘s misconduct caused real harm by failing to correctly pay cover to a small number of sick or disabled customers,” she said.