Insurance company Tower forced to refund $9.5 million to overpaid customers as Financial Markets Authority files civil proceedings

  • 07/03/2024
Insurance form.
Insurance form. Photo credit: Getty

Insurance company Tower is refunding about $9.5 million to overcharged customers. 

It comes as the Financial Markets Authority, New Zealand’s financial watchdog, filed civil proceedings at the High Court in Auckland against the insurer for failing to apply multi policy discounts to eligible customers’ premiums. 

The authority alleged Tower had misled customers in its marketing material about the offer since September 2016, resulting in about 65,000 affected customers - 81,200 policies. 

However, it’s noted this number has not been finalised as the harm is ongoing for some customers. 

So far, 58,900 customers have been reimbursed at a cost of $9.26 million. 

While the terms of the discount have varied over time, generally customers were eligible for the offer if they took out more than one qualifying insurance policy. 

However, the authority found in invoices and certificates of insurance issued by Tower the multi policy discount customers were entitled to as advertised in marketing at the time was not applied. 

The failures were due to flaws in Tower’s IT systems and a lack of adequate controls, the authority added. 

"A significant number of customers have been overcharged over a long period as a result of Tower's failure to address these problems," authority head of enforcement Margot Gatland said in a statement. 

"These proceedings are another example of where an insurer has failed to invest in the systems, controls or governance processes to ensure that where errors occur, they are picked up quickly and fixed and customers are remediated in a timely way." 

In response, Tower said it had self-reported this failure and implemented checks and balances to determine and remediate any further incorrectly applied discounts.  

In most cases, this is done without the need for any refund, the company said. 

"While the company has acted in good faith, self-reported the issue and is undertaking a comprehensive remediation programme, we accept and deeply regret that customers have been impacted,” Tower chair Michael Stiassny said. 

"We apologise unreservedly and will continue to work in earnest to address outstanding issues." 

The Financial Markets Authority is seeking a declaration from the court that Tower contravened the Financial Markets Conduct Act and that a pecuniary penalty is paid to the Crown.