Regulator calls for improved systems, controls, and customer transparency
The Financial Markets Authority (FMA) has warned Southern Cross Medical Care Society (SCMCS) and Southern Cross Pet Insurance (SPCI) for failing to honour advertised discounts on their insurance products, constituting breaches of the Financial Markets Conduct Act.
FMA and both entities acknowledged breaches of the Financial Markets Conduct Act’s fair dealing provisions due to false or misleading representations. These breaches involved failing to apply advertised discounts properly, leading to customer overcharges. The issues were attributed to inadequate controls or technical errors, as assessed by FMA.
The entities failed to apply several specific discounts, leading to $424,508 in overcharged premiums by SCPI and $161,547 by SCMCS. These errors affected a small percentage of their customer bases but spanned a significant period, with SCMCS's case extending more than 17 years.
Disclosure and remediation efforts
The issues, initially reported by SCPI to FMA in November 2022, were uncovered through further enquiries and an internal review. Both entities have since launched remediation programs to refund affected customers.
SCPI has refunded 96% of its affected customers while SCMC has refunded 90% of its affected customers.
“The FMA has considered the level of harm caused and that both entities have repaid most of their customers,” said Peter Taylor (pictured above), FMA director of specialist supervision. “They cooperated proactively with the FMA and there is no evidence of any deliberate misconduct.”
In making the warning public, FMA, which recently finalised an agreement with the ex-managing director of CBL Corporation and saw to the sentencing of a Hawke’s Bay mortgage broker, stressed the need for better systems, controls, and transparency towards customers.
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