The case was filed by FMA
Medical Assurance Society New Zealand (MAS) is set to pay a pecuniary penalty of $2.1 million following proceedings initiated by the Financial Markets Authority (FMA).
The penalty is a consequence of MAS making false and misleading representations to some customers, breaching section 22 of the Financial Markets Conduct Act 2013 (FMCA).
In September, MAS admitted its infringement, acknowledging failures in applying multi-policy and no-claims bonus discounts, erroneous inflation adjustments, and miscalculations in benefit payments.
During the penalty hearing, Justice Peter Churchman affirmed MAS’s violation of section 22 of the FMCA and imposed a pecuniary penalty starting at $3m, with a 30% discount, resulting in the final penalty of $2.1m.
“The making of false and misleading representations, and any associated overcharging, undermines the purposes of the FMCA in promoting confident participation of consumers and facilitating the development of transparent financial markets,” Churchman said in a media release.
“Customers are entitled to trust in the accuracy of their insurance provider’s communications in its systems but cannot do so where they must double check pricing and invoices (particularly where, as is the case here, customers could not verify whether amounts charged or benefits paid were correct).”
Margot Gatland, FMA head of enforcement, said MAS’ breaches extended extensively throughout its insurance business, revealing fundamental flaws in the company’s system and process design, which were largely dependent on manual processes without adequate detective controls.
“The issues caused considerable harm to a significant number of MAS’s customers, being more than 16,000 across all issues, and the harm caused by the benefits payment issue affected customers who were at particularly vulnerable times in their lives,” Gatland said. “While a relatively small insurer by market standards, the net gain MAS made from its breaches was significant.”
MAS failures
FMA filed the proceedings against MAS at the High Court in Wellington for the following failures:
- Between 2014 and 2022, MAS failed to apply multi-policy discounts or applied lower rates incorrectly, affecting around 8,864 customers with overcharged premiums totaling approximately $3,318,997.
- MAS erroneously applied a 3% inflation adjustment instead of the specified rate, impacting roughly 6,267 customers with overcharged premiums of around $1,714,067.
- MAS made calculation errors leading to lower benefit payments for approximately 104 customers, resulting in underpayments of approximately $1,047,059.
- MAS did not accurately apply the correct no claims bonus grade to premiums owed by some customers, affecting around 1,235 customers with overcharged premiums totalling some $572,061.
MAS self-reported the issues to the FMA between 2019 and 2022, initiating a remediation program and repaying affected customers $6,115,271.
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