ASB faces legal action over alleged insurance and banking missteps
ASB faces legal action over alleged insurance and banking missteps | Insurance Business New Zealand
Insurance News
ASB faces legal action over alleged insurance and banking missteps
Regulator highlights significant financial harm to thousands of customers
Insurance News
By
Roxanne Libatique
The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has initiated civil proceedings against ASB Bank Limited, accusing the bank of making false or misleading statements in relation to its insurance products and banking services.
The case centres on two key issues.
Multi-policy discounts on insurance products
The first issue involves ASB’s failure to correctly apply multi-policy discounts on its insurance products.
An additional concern is that staff misinformed customers with caravan and trailer insurance policies, erroneously advising them that they qualified for a discount, despite those policies being ineligible.
Fee exemptions on several types of bank accounts
The second issue concerns ASB’s failure to consistently apply fee exemptions on several types of accounts using its Fastnet Banking service.
The affected accounts include Society Cheque, Education Administration, and Business Focus accounts.
According to the FMA, these fee exemption issues arose from similar manual processing errors and a lack of proper systems to verify that the exemptions were correctly applied.
Alleged ASB breaches and affected customers
The FMA’s claims pertain to events dating back to 2009 for the insurance discounts and 2011 for the banking fee exemptions. However, the legal proceedings are based on provisions in the Financial Markets Conduct Act 2013 (FMC Act), which came into force in April 2014.
Between April 2014 and May 2022, 23,062 customers were affected by ASB’s failure to apply multi-policy discounts, resulting in approximately $2.8 million in overcharged premiums. In addition, 2,435 customers were affected by the fee exemption issue, with overcharges totalling about $1.15 million.
ASB has since completed a remediation process, refunding affected customers with the overcharged amounts and additional interest. It reported the multi-policy discount issue to the FMA in September 2021, and the fee exemption issue in December 2021.
The FMA alleges ASB breached section 22 of the FMC Act by misrepresenting the cost of its insurance products, the availability of certain benefits for caravan and trailer policies, and the pricing of its banking services.
The regulator is seeking declarations of ASB’s breaches, along with penalties and legal costs.
Margot Gatland, FMA head of enforcement, said the regulator alleges that ASB’s inadequate systems and controls caused significant financial harm to thousands of customers over an extended period.
“While we acknowledge ASB’s efforts to remediate the issues, the length of time it took to identify and resolve the mistakes was pertinent to the FMA’s decision to file civil court action,” she said.
The case has been filed in the High Court in Auckland.
The FMA brought the case after AA Insurance acknowledged that it breached section 22 of the Financial Markets Conduct Act. The breaches involved failures to apply advertised discounts, leading to customer overcharges totalling around $11.12 million.
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