Cigna to pay $180,000 after admitting credit card insurance failures

Tuesday, 14 June 2022

Credit card repayment insurance was poor value, and the big banks have not stopped selling it.

Cigna Life Insurance, and its subsidiary Onepath Life, will pay $180,000 to the Financial Markets Authority Te Mana Tātai Hokohoko for their part in the credit card misselling scandal which landed ANZ in court.

Last year, ANZ was fined $280,000 for selling some customers credit card repayment insurance they were too old to claim on, and charging others for “duplicate” policies that offered no additional cover to them.

But ANZ’s credit card repayment insurance was provided by Onepath Life, which was sold to Cigna in 2018.

Now, Cigna and Onepath Life have admitted they breached the fair dealing provisions of the Financial Markets Conduct Act in relation to the sales and mistakes that landed ANZ in court.

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Most banks will still issue joint credit cards, but they may charge an additional fee. ANZ no longer issues joint credit cards. There are risks to going into debt on a credit card with a trusted other.

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The FMA said Cigna and Onepath Life should have spotted the mistakes ANZ had made.

Liam Mason, general counsel at the Financial Markets Authority was critical of credit card repayment insurance at a conference in 2019, saying: ‘We see some are being sold to customers without their understanding of the limitations’.

The issue came to light when the Financial Markets Authority (FMA) the Reserve Bank of New Zealand conducted a review of the conduct of life insurers, following a similar conduct review of banks.

During that review, OnePath and Cigna notified the FMA of the issues, said Liam Mason, FMA general counsel.

Most life insurance sold by banks is now provided by third party insurers like Cigna and Fidelity Life, which are not owned by the banks selling them.

Although OnePath and Cigna did not directly make any misleading representations to their customers, they admitted liability for the misleading representations made by ANZ, which was acting as their agent, Mason said.

Cigna had pledged its commitment to developing and maintaining effective policies, systems, and processes to prevent further failures to treat customers fairly, Mason said.

OnePath was no longer trading, he said.

“This enforceable undertaking sends a message to the industry that product providers, underwriters, distributors, and intermediaries have a shared responsibility for ensuring customers are treated fairly,” Mason said.

“OnePath and Cigna received regular information from ANZ about the affected policies and should have had systems and controls to identify the issues and taken steps to ensure that their distributor was delivering their policies correctly.”

All the major banks have stopped selling credit card repayment insurance, which the FMA said was poor value.

Criticism of credit card repayment insurance was more muted in New Zealand than in Australia.

But in 2019, Mason, then the FMA’s director of regulation, said there were “very slim circumstances” in which credit card repayment insurance was likely to be of real value to consumers.