Tower Insurance Fined $7 Million for Decade of Overcharging Customers

The High Court in New Zealand has imposed a fine of $7 million on Tower Insurance for overcharging its customers for over a decade. The penalty arises from the company’s failure to correctly apply multi-policy discounts (MPDs), a practice that misled approximately 61,000 policyholders across more than 90,000 policies. This civil case was initiated by the Financial Markets Authority (FMA) as part of ongoing efforts to address historical violations of fair trading laws within the insurance and finance sectors.

According to Margot Gatland, head of enforcement at the FMA, Tower’s operational systems were found to be inadequate. This deficiency persisted despite a prior agreement with the Commerce Commission in 2017 to rectify such issues. Gatland noted, “Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount.”

Self-reporting and continued breaches

In 2021, Tower self-reported its breaches to the FMA, acknowledging its failure to apply the discounts properly. Despite this admission and the commitment to resolve the issues, overcharging continued until early 2023. In total, Tower has repaid over $11.7 million to customers affected by the discrepancies.

The court’s judgment highlighted that the previous settlement with the Commerce Commission was designed to ensure that Tower made significant investments in its systems and processes. These measures were intended to guarantee that MPDs were applied accurately to customer accounts.

Gatland emphasized the FMA’s ongoing commitment to promoting “fair, efficient, and transparent financial markets.” She stated, “Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists. This is why we continue to respond to fair dealing breaches like this.”

The FMA has taken decisive action against multiple financial institutions over the past five years, including ten banks and insurance companies, for misleading customers and overcharging practices. These actions have resulted in penalties totaling tens of millions of dollars and repayments exceeding $200 million to around 1.5 million customers.

This case underscores the FMA’s commitment to maintaining accountability within the financial sector and protecting consumer rights in New Zealand.