FMA issues warnings to Southern Cross entities
FMA issues warnings to Southern Cross entities | Insurance Business New Zealand
Insurance News
FMA issues warnings to Southern Cross entities
Entities slammed over discount misapplications
Insurance News
By
Roxanne Libatique
The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has issued notices to two major entities within the Southern Cross group: Southern Cross Medical Care Society (SCMCS) and Southern Cross Pet Insurance (SPCI).
These notices were in response to violations of the Financial Markets Conduct Act, specifically regarding misleading or false representations about discount applications on insurance products.
Claims against SCMCS and SPCI
The issue at hand involved the incorrect application of advertised discounts for both SCMCS and SPCI, leading to customers paying higher premiums than they should have. The FMA’s findings indicated that these errors stemmed from a combination of inadequate internal controls and technical glitches.
Initial reports of these discrepancies came from SPCI in November 2022, with further details emerging upon closer inspection by the FMA and internal reviews conducted by the wider Southern Cross Group. The discounts that were improperly applied included those for additional pets, direct debit payments, and Southern Cross membership by SPCI. For SCMCS, the missed discounts included offers for free children coverage, rewards for healthy living, and reductions for low claim submissions.
Financially, the oversight amounted to SPCI overcharging around $424,508 to 7,542 policyholders, which represents roughly 1.28% of its clientele. SCMCS’s error affected 1,957 of its customers with overcharges totalling $161,547, or about 0.2% of its customer base.
SCMCS and SPCI begin remedial efforts
Following these findings, both organisations embarked on remedial efforts to rectify the impact on affected customers.
To date, SPCI has refunded 96% of its impacted clients, while SCMCS has reached a 90% refund rate.
FMA warns SCMCA and SPCI
“The FMA considers that making this warning public is proportionate considering a range of factors,” said Peter Taylor, director of specialist supervision at FMA. “The FMA has considered the level of harm caused and that both entities have repaid most of their customers. They cooperated proactively with the FMA and there is no evidence of any deliberate misconduct. Yet, the entities failed to apply the promised discounts over a prolonged period, in SCMCS’s case some 17 years,” he said. “The FMA expects entities to have better systems and controls in place to identify and prevent issues as early as possible and to be transparent with customers when problems arise.”
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