FMA takes Medical Assurance Society to court over fair dealing breaches

The regulator said data entry errors by Medical Assurance Society employees were to blame in some instances. Photo / Supplied

The Financial Markets Authority (FMA) is filing proceedings against the Medical Assurance Society for fair dealing breaches under section 22 of the Financial Markets Conduct Act.

The FMA claimed that between 2014 and 2022, the Medical Assurance Society (MAS) failed to apply the correct inflation adjustments on its customer policies, failed to apply multi-policy discounts and no claims bonuses, and underpaid life and disability claims to eligible clients.

MAS self-reported the issues to the FMA between 2019 and 2022, including reporting one of the issues as part of the FMA and Reserve Bank of New Zealand’s conduct and culture reviews, which found there were widespread problems in the industry.

MAS began compensating affected customers in November 2021.

The FMA’s claim alleged MAS applied an inflation adjustment of 3 per cent, instead of the rate specified in policies of over 6,000 customers, resulting in $1.7 million in overcharged premiums of which $780,000 has been reimbursed at the time the claim was filed.

It also claimed MAS did not apply the multi-policy discount or incorrectly applied a lower rate of the discount to premiums owed to 8,800 customers resulting in $3.3m in overcharged premiums ($3.8m has been reimbursed).

It also claimed MAS made various errors when manually calculating benefit payments to more than 100 customers resulting in $1m in underpayments (over $1.1m has been reimbursed).

And it claimed MAS did not apply the correct no claims bonus grade to premiums owed by over 1,200 eligible customers resulting in nearly $600,000 of overcharged premiums (more than $600,000 has been reimbursed).

The FMA claimed MAS’s failures were due to errors and deficiencies in its systems, including data entry errors by employees.

It acknowledged that MAS has been cooperative with the regulator through its investigation since disclosing the issues.

The FMA is seeking a declaration that MAS contravened the Financial Markets Conduct Act and a pecuniary penalty.

The proceedings were filed at the High Court in Wellington.