Southern Cross insurers slapped with warning for misleading customers

  • 26/03/2024
A health insurance form.
A health insurance form. Photo credit: Getty

Two Southern Cross insurers have been warned over failing to apply advertised discounts on insurance products, meaning customers had been overcharged – in one case for over 17 years.

The Financial Markets Authority (FMA) said in a statement on Tuesday that Southern Cross Medical Care Society and Southern Cross Pet Insurance breached fair dealing provisions by making false or misleading representations.

Both insurers – which are separate legal entities within the Southern Cross Group - accepted this.

The FMA said the insurers failed to correctly apply advertised discounts to affected customers' invoices, resulting in overcharged premiums. 

The FMA said the breach was due to poor controls and technical errors.  

The pet insurance arm made an initial report to the FMA in November 2022 disclosing some of the issues and later reported more details. 

However, after a review of the wider Southern Cross Group the FMA found the following breaches.

Southern Cross Pet Insurance:

  • Additional pet discount 
  • Direct debit discount 
  • Southern Cross membership discount 

Southern Cross Medical Care Society: 

  • Free child discount 
  • Healthy lifestyle rewards discount 
  • Low claims discount

The total amount of pet insurance premiums overcharged was over $424,500, affecting more than 7500 customers – about 1.3 per cent of its customer base.

The insurer has refunded 96 percent of its impacted customers. 

Meanwhile, for medical insurance, nearly 2000 customers were overcharged more than $161,500 – affecting about 0.2 percent of its customer base. 

The insurer has refunded 90 percent of these affected customers. 

FMA Director of Specialist Supervision Peter Taylor said there was no evidence of deliberate misconduct and insurers cooperated proactively.

However, he said going public with the warning was valid.

"The entities failed to apply the promised discounts over a prolonged period, in SCMCS's case some 17 years," he said.

"The FMA considers the wider Southern Cross Group did not provide adequate information to its customers when it publicly acknowledged the issues concerning its failure to properly apply the discounts. 

"The FMA expects entities to have better systems and controls in place to identify and prevent issues as early as possible and to be transparent with customers when problems arise."

Both insurers have also completed remediation programmes.

Southern Cross Health Society Chief Executive Officer Nick Astwick has apologised to customers.

"We're extremely disappointed that on this occasion we didn't give our members and customers the value they were expecting, falling short in delivering what they were entitled to. We moved quickly to put it right and we know we simply need to be better for our members," he said.

"With a business of the Health Society's size, where we pay more than $6.5 million dollars in health insurance claims every business day, and Southern Cross Pet Insurance paying $100,000 in claims daily, mistakes can unfortunately happen.

"What's important is that we find them fast and put things right quickly."

Astwick said both insurers worked closely with the FMA since discovering the discounting issues.

"We value our members and customers and will continue working hard to earn the trust they put in us every day."