IAG New Zealand Limited, the country’s largest insurer, has been fined $19.5m by the High Court after admitting to widespread historical failures that resulted in incorrect premium pricing, miscalculation of Government levies and the failure to apply discounts to hundreds of thousands of customers.
The ruling follows an investigation by the Financial Markets Authority (FMA) prompted by a series of self-reports from IAG between September 2021 and December 2024.
The breaches affected around 269,000 customers and led to overcharges of approximately $35m. IAG NZ, which operates the State, AMI and NZI brands, admitted in court to making false and misleading representations about its insurance products. The FMA said the failures spanned IAG’s business divisions and distribution partners, pointing to significant shortcomings in the company’s systems and processes.
FMA response and enforcement executive director Louise Unger said the scale of the offending was unprecedented. “The nature and scale of IAG’s contraventions was greater than those present in any other fair dealing case the FMA has to date taken to Court,” she said. “[IAG] is a large and sophisticated market leader and accordingly plays a vital role in upholding market standards, yet its significant underinvestment led to widespread failures of its systems and processes, to the detriment of its customers.”
Justice Andrew, who presided over the case, described the extent of the breaches as the most aggravating feature of IAG’s conduct. He noted that the insurer had delayed reporting known issues to the FMA even after a culture and conduct review. “[The] penalty must be set at a level that sends a clear message to the financial market – and particularly similarly large and well-resourced institutions – as to the importance of investing in robust systems and making good on the promises to customers,” he said.
IAG self-reported 41 issues in total. Eight causes of action covering 10 major breaches were pleaded in court, while a further 31 issues — expected to result in around $21m in customer remediation — were included in the court schedule for context but not formally pursued. The court said the final penalty reflected IAG’s cooperation, early admissions and remediation efforts but emphasised the seriousness of the conduct.
Unger said the FMA would continue to act to uphold trust in the financial system. “We will continue to respond to misleading practices to ensure New Zealand has a fair financial system,” she said. IAG acknowledged the penalty and said it recognised past mistakes. Chief executive Amanda Whiting said the company had “invested heavily” in new systems and processes, with significant changes underway. She said the insurer’s priority had been to “put things right” through refunds and apologies to affected customers. “The underlying issues have been fixed, and all affected customer’s repayments were completed earlier this year,” she said.