Southern Cross insurance arms issued warning after overcharging premiums

More than 9000 customers of Southern Cross Medical Care Society and Southern Cross Pet Insurance were overcharged premiums. Photo / NZME

Two separate insurance arms of the Southern Cross Group have been issued warnings for failing to apply advertised discounts to insurance products, resulting in some customers being overcharged premiums.

Southern Cross Medical Care Society (SCMCS) and Southern Cross Pet Insurance (SPCI) have both accepted they breached fair dealing provisions of the Financial Markets Conduct Act by making false or misleading representations.

The Financial Markets Authority (FMA) said the total amount of SCPI premiums overcharged was $424,508, affecting 7542 customers or approximately 1.28 per cent of its customer base.

SCMCS overcharged $161,547 across 1957 customers, affecting approximately 0.2 per cent of its customer base.

Both entities have completed remediation programmes. SCPI has refunded 96 per cent of its affected customers while SCMC has refunded 90 per cent of those affected, the FMA said.

The cause of each issue was poor controls and/or technical errors.

The issue came to light after SCPI made an initial report to the FMA in November 2022 disclosing some of the contraventions and later reported more details. Following further inquiries from the FMA and an internal review in the wider Southern Cross Group, the extent of the contraventions was established.

It was found both entities failed to apply the promised discounts over a prolonged period, in SCMCS’s case some 17 years.

FMA director of specialist supervision Peter Taylor said both SCPI and SCMC cooperated proactively with the FMA and there is no evidence of any deliberate misconduct.

“The FMA considers that making this warning public is proportionate considering a range of factors. The FMA has considered the level of harm caused and that both entities have repaid most of their customers,” Taylor said.

“The FMA considers the wider Southern Cross Group did not provide adequate information to its customers when it publicly acknowledged the issues concerning its failure to properly apply the discounts. 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.”

SCPI failed to correctly apply the following discounts: Additional pet discount, direct debit discount and Southern Cross membership discount.

SCMCS failed to correctly apply the following discounts: Free child discount, healthy lifestyle rewards discount, low claims discount.

Earlier this month the FMA filed civil proceedings against insurer Tower over fair dealing breaches resulting in approximately $9.5 million in overcharges to 65,000 of its customers.