Insurer IAG fined $19.5m after confessing to accidentally overcharging many customers

Monday, 6 October 2025

The country’s largest insurer IAG has been fined $19.5 million at the High Court in Auckland for overcharging customers, and making mistakes in calculating government levies.

About 269,000 IAG customers were affected, resulting in overcharges of $35m, said the Financial Markets Authority Te Mana Tātai Hokohoko (FMA), which took the prosecution against the insurer.

Amanda Whiting, chief executive of IAG New Zealand, which owns the State, AMI and NZI brands, said: “Since self-identifying these issues, our priority has been to put things right for impacted customers, offering a sincere apology and issuing refunds.

“We are doing everything to prevent these issues happening again,” she said.

Louise Unger, executive director for response and enforcement at the FMA, said: “ 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, and the judgement confirms they warrant a significant penalty.”

“IAG is New Zealand’s largest insurer. It 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,” she said.

“It also failed to respond to and report many of the issues in an appropriate timeframe,” Unger said.

The penalty could have been higher, but IAG was given discounts for self-reporting, its early offer of admissions, its “exemplary” cooperation with the FMA’s investigation, and the steps taken to make refunds to customers, which have totalled around $21m.

IAG identified and reported the errors to the FMA after the regulator teamed up with the Reserve Bank in 2018 and 2019 to conduct a review of banks and insurers after terrible behaviour by Australian banks and insurers was revealed in an Australian Royal Commission into misconduct in financial services.

Insurers which completed the exercise revealed how error-prone the industry was, with tens of thousands of customers having been overcharged, often because they did not get the multi-policy discounts they had been promised.

As a result of errors identified by insurers Suncorp (owner of the Vero brand), Tower, AA Insurance, Cigna, AA Insurance, MAS, ASB, and ANZ have all all had to make refunds to customers, with Cigna, Vero, MAS, AA Insurance, and ANZ having been fined after court action.

The fine imposed by justice Jane Anderson was for breaches of the Financial Markets Conduct Act as a result of the insurer failing to correctly price the premiums charged to customers, and by failing to correctly apply discounts, including multi-policy discounts, to its insurance products sold via its business divisions and distribution partners.

Unger said: “The penalty has been 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 made to customers.”

Whiting said: “The underlying issues have been fixed, and all affected customers’ repayments were completed earlier this year.”