Vero must pay $3.9m for ‘false and misleading’ statements to customers

Vero admitted it did not apply multi-policy discounts to some customers who were entitled to them. Photo / NZPA

Big insurer Vero has been ordered to pay a $3.9 million penalty for failing to apply multi-policy discounts to customers.

The Financial Markets Authority (FMA) took Vero Insurance New Zealand to court.

In June this year, Vero admitted it did not apply multi-policy discounts to some customers who were entitled to them.

The FMA said the High Court’s Justice Geoffrey Venning imposed a pecuniary penalty with a starting point of $6m, a discount of 35 per cent and a final penalty of $3.9m.

Justice Venning stated Vero failed to charge customers the right amount, and had no adequate explanation for its failure not to have detected the issue earlier.

“This penalty is the largest the FMA has secured in a case of this kind which reflects the seriousness of the deficiencies in Vero’s systems that affected many customers over a prolonged period,” FMA head of enforcement Margot Gatland said today.

The case reinforced the importance to companies of investing properly in systems that deliver benefits promised to customers, Gatland added.

The FMA said Vero and its intermediaries had between April 2014 and May 2022 issued the invoices to about 42,000 affected customers and effectively overcharged $9.9m in premiums because of the issue.

The authority said Vero failed to apply the discounts due to system errors and deficiencies, including data entry errors by Vero employees and some intermediaries.

But the FMA said liability primarily rested with Vero as it designed, owned and maintained the systems at fault.

“Vero reported the issue to the FMA in December 2019, at which time its remediation programme had been under way for some months,” the FMA added.

The insurance company had already reimbursed $13.97m in overcharges to affected policyholders.

“We discovered the systems issue through our own review process, launched a full investigation and reported the issue to the FMA,” a Vero spokesperson said today.

“This investigation also revealed that this same systems issue meant that a significantly larger number of customers were found to have been undercharged,” they added.

“Vero took no steps to reclaim these undercharge losses.”