FMA files proceedings against Tower Limited for alleged fair dealing breaches

Media Release
MR No. 2024 – 5

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has filed civil proceedings against Tower Limited (Tower) for failing to apply multi policy discounts to eligible customers’ premiums, resulting in approximately $9.5 million* in overcharges.

The FMA alleges Tower breached section 22 of the Financial Markets Conduct Act (FMC Act) by misleading customers about its multi policy discount offer since 10 September 2016. The alleged breach has affected approximately 65,000 customers (81,200 policies).

For over 20 years Tower has offered a multi policy discount for customers that hold two or more eligible policies with the provider. The terms of the discount have varied over time, generally customers were eligible if they took out more than one qualifying insurance policy.

However, 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 FMA also alleges that Tower misled customers in marketing material as it did not make it clear that the discount only applied to specific policies or that the discount would not be immediately applied when the new policy was purchased. 

These failures were due to fundamental flaws in Tower’s IT systems and a lack of adequate controls.

Margot Gatland, FMA Head of Enforcement, said: “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. A significant number of customers have been overcharged over a long period as a result of Tower’s failure to address these problems.”

Tower has so far carried out remediation in respect of approximately 58,000 customers and paid $9.26 million.

The FMA is seeking a declaration from the court that Tower contravened the FMC Act and that a pecuniary penalty is paid to the Crown. The proceedings were filed in the High Court in Auckland.

ENDS

>Notes

*This number has not been finalised as the harm is ongoing for some customers.

In October 2017 Tower entered into a settlement agreement with the Commerce Commission whereby Tower agreed to fix the systems which caused the historic multi policy discount issues and remediate the affected customers.

Media contacts:

Andrew Park
FMA Media Relations Manager
[email protected]
021 220 6770

Matt Chatterton
FMA Senior Adviser, Media Relations
[email protected]
021 241 7868