Insurer AIA admits misleading customers
Life insurer faces $700,000 fine.
Life insurer AIA is facing a $700,000 fine after admitting it misled customers.
AIA not only gave customers incorrect and misleading information about their policies, but also continued to charge some customers when their cover had stopped.
The Financial Markets Authority (FMA) has brought proceedings against the company in the High Court. The case is based on three core breaches of the Financial Markets Conduct Act that:
-
Policy benefits were misrepresented: The FMA said AIA told certain customers they were entitled to “passback benefits” – extra cover added to the customer’s existing policy. However, AIA failed to clarify these benefits only applied to policies taken out after 2003.
FMA head of enforcement Karen Chang said affected customers would have “undergone a traumatic and life-changing event” before making a claim under their policy.
“AIA’s behaviour exacerbated and prolonged the harm to customers who were already in vulnerable circumstances. They took out insurance to reduce stress and financial impact in a time of significant hardship and uncertainty, but when they needed the cover they had been told they had, it was denied,” Chang said.
Customers were overcharged and underpaid: AIA also continued to charge premiums to some customers when their policy had ceased. Others had their policy incorrectly stopped by the company, resulting in some of those with existing claims being paid out less than they should have been.
Inflation adjustments were incorrect: Many AIA customers had policies where the sum-insured was adjusted in line with inflation, with premiums rising as a result. However, the FMA said inflation adjustments were incorrectly applied, leading to some customers paying too much in premiums.
AIA reported the breaches after it was asked for information as part of the 2018 FMA and Reserve Bank review of life insurers. AIA chief executive Nick Stanhope said customers had since been reimbursed.
In bringing proceedings, the FMA said it had considered the seriousness of the breaches and the length of time it had taken to deal with affected customers. The case only captures breaches that occurred from 1 April 2014 when the Financial Markets Conduct Act came into force.
We’re campaigning for tougher rules for the insurance industry. Our latest survey found only 13% of consumers felt confident they could trust insurers to give them good advice.
Member comments
Get access to comment