ASB faces High Court action for overcharging insurance policyholders

Tuesday, 8 October 2024

ASB has become the latest big name to face legal action from the Financial Markets Authority (FMA) Te Mana Tātai Hokohoko for allegedly making false or misleading representations in relation to insurance products.

The FMA has filed a case with the High Court in Auckland claiming the bank failed to apply multi-policy discounts on ASB-branded insurance products as a result of bank staff errors.

In some cases, ASB staff told customers with insurance policies for caravans and trailers that they were eligible for the multi-policy discount, despite it not being true.

On Tuesday, AA Insurance was fined $6.175 million at the High Court for failing to apply multi-policy and membership discounts, as well as guaranteed no claims bonuses.

The current FMA case against ASB alleges the bank failed to consistently apply fee exemptions to certain customer accounts with access to ASB’s Fastnet Banking service, specifically: Society Cheque, Education Administration, and Business Focus accounts.

The regulator said those failures were again the result of bank staff errors, however, it alleges ASB did not have adequate systems in place to check that the fee exemptions were being applied correctly.

The multi-policy discount issue dated back to 2009, and the Fastnet Banking issue began in 2011, the FMA said.

However, the bank was not facing action over all the failures, as the FMA was taking action under the Financial Markets Conduct Act 2013 which only came into effect in 2014.

The FMA said 23,062 customers were affected by the multi-policy discount issue between April 2014 and May 2022, being overcharged a collective $2.8m.

During the same period, 2435 customers were affected by the Fastnet Banking overcharging, it alleged. Those customers paid $1.1m too much in fees.

ASB, which told the FMA about the overcharging in 2021, had paid the money back with interest, the FMA said.

Adam Boyd, executive general manager for personal banking at ASB, said: “We acknowledge we’ve made mistakes in these two situations and want to apologise to those customers impacted by these errors.”

He said: “As well as working to refund affected existing and past customers, including use of money interest, we have made changes to our processes, and worked closely with our insurance partner in relation to the multi-policy discount matter, to ensure these issues won’t occur again.”

The FMA’s head of enforcement, Margot Gatland, said: “The FMA’s case alleges ASB’s poor systems and controls led to millions of dollars in financial harm to its customers for more than a decade.

“While we acknowledge ASB’s efforts to remediate the issues, the length of time it took to identify and the resolve the mistakes was pertinent to the FMA’s decision to file civil court action.”