FMA focus on fair dealing and the key takeaways for insurers
MinterEllisonRuddWatts have highlighted some key points for insurers in light of the FMA’s focus on fair dealing. Since June 2020, the FMA has brought five proceedings in relation to breaches of the fair dealings provisions in Part 2 of the Financial Markets Conduct Act 2013 (FMCA) against insurers making representations to customers admitted to be false or misleading. Examples involved systems failures in relation to not applying discounts or benefits correctly, cover cessation/duplication or charging premiums after termination of policies or incorrect inflation adjustments. Often, statements made through marketing materials, invoices or policy anniversary letters were not delivered on, so the FMA considered this a false or misleading representation to customers. Several of these cases were self-reported to the FMA with steps already undertaken to remedy systems issues and compensate customers.
Both the FMA and the Courts have been focused on deterrence, using penalties to encourage entities to maintain adequate processes and systems. Customer remediation to date since the FMA’s Conduct and Culture reviews in 2018 and 2019 has now reached $161.3 million, impacting more than 1.51 million consumers. To date, the largest penalty imposed was $3.575 million on Cigna Life Insurance New Zealand. Three alleged breaches are ongoing investigations, but in all cases the FMA is seeking declarations and pecuniary penalties.
MinterEllisonRuddWatts highlight three key learnings for insurers:
1) Invest sufficiently and regularly into your systems to ensure they are reliable and fit for purpose;
2) Systems need to be regularly checked for issues, and any issues need to be appropriately escalated;
3) Substantiate all marketing claims and ensure underlying systems and processes are cable of delivering what is promised.
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