IAG’s ‘troubling compliance culture’, slowness to act called out in record judgment

Tuesday, 7 October 2025

The country’s largest insurer, IAG, has been accused of carelessness and “a troubling compliance culture” in a High Court judgment in which Justice Jane Anderson imposed a record $19.5 million fine.

It could have been worse for the insurer, which owns the State, AMI and NZI brands, as the maximum penalty under the Financial Markets Conduct Act could have been $126m, Anderson recorded.

In her judgment, Anderson found the insurer knew about some overcharging on some household insurance policies for years before taking action or informing the FMA.

Some policies had been sold through ASB, Westpac, and BNZ, whose systems also failed in many cases to spot their customers were not getting things like multi-policy, and multi-property discounts.

IAG New Zealand chief executive Amanda Whiting apologised, and said: “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. “The underlying issues have been fixed, and all affected customers’ repayments were completed earlier this year.”

In imposing the record fine, Anderson said: “I accept that IAG’s conduct was not intentional or deliberate. However, IAG displayed a level of carelessness and there is evidence that some of the issues persisted for close to a decade.”

At least 250,000 IAG customers had been affected, overcharged by around $35m.

“It is the sheer scale of the wrongdoing here and IAG’s position as market leader that distinguishes this case from others. IAG insures almost one out of two households and businesses in New Zealand,” Anderson said.

But it was not only IAG’s size, and the need to send “a clear message to the market” on the importance of companies investing in “robust systems and making good on the promises made to customers“ that led to such a large fine.

While IAG “self-reported” the issues to the Financial Markets Authority Te Mana Tātai Hokohoko (FMA), which took the prosecution against the insurer, Anderson found long delays in IAG telling the regulator about its wrongdoing.

The FMA put the spotlight on banks and insurers in 2019 with an industry-wide review following revelations in Australia about the misbehaviour of banks and insurers over there.

The regulator asked insurers to report any systemic issues to it.

“It [IAG] did not report any systemic conduct or culture issues,” Anderson said. “The identification of some 41 issues shortly thereafter – many of which date back several years – underscores that IAG’s systems were so lacking that it did not even identify the possibility of such issues when it specifically commented to the regulator on its compliance.”

One of the issues had been first identified by IAG as early as 2013, Anderson recorded.

“IAG’s knowledge of the breaches and the delay in reporting them to the FMA, particularly following the culture and conduct review, is an aggravating factor,” she said.

The 2013 issue was the failure to apply multi-policy discounts to policies sold by ASB under ASB branding, which ultimately affected more than 24,000 ASB customers.

“Various managers at ASB and IAG discussed the issue between July 2013 and June 2016,” Anderson recorded.

“ASB asked in 2015 whether IAG would consider speaking to ASB staff about the correct application of the discount, but there was no response. In 2016, it was agreed that the issue should be kept contained until more was known. It was not until 2021 that a formal investigation took place and the issue was reported to the FMA.”

Another of the issues was that from at least 2013, some ASB and AMI customers did not have the correct number of dwellings insured, including because staff had to manually enter the number on IAG’s systems, and because of other flaws within those systems.

“IAG first identified the multi-dwelling issue in October 2016, but deemed the risk acceptable,” Anderson recorded. “Further affected policies were identified in November 2019 and refunds approved, but no further steps were taken to address the issue at that time. It was not until July 2021 that the issue was escalated, further policies having been identified, and October 2022 that the first systems changes were implemented.”

IAG didn’t report the issue to the FMA until April 2022, Anderson found.

IAG did not move fast to investigate some issues, Anderson found, including that some “high value” vehicle owners were misled into thinking they qualified for multi-policy discounts when they did not, resulting in many Tesla-owners not getting the discounts they expected.

After being alerted in September 2020 by an ASB customer, it took IAG three months to log it as a “risk”, and a further 18 months to “investigate” with IAG notifying intermediaries and the FMA in August 2022.

BNZ and the Cooperative Bank both had customers who did not get their multi-policy discounts between 2012 and 2023. Anderson found IAG was aware of this at a senior management level from at least September 2018.

“The issue was discussed between various managers in early 2020 but it was agreed that nothing should be done about it at that time,” she said.

“One of those managers later acknowledged this was a mistake and escalated the issue in September 2021.”

Despite the criticism, Anderson said IAG’s overall conduct since reporting the first tranche of issues to the FMA had been exemplary and was to be commended.

She found IAG had accepted liability at the earliest stage, and there could be no question the insurer had invested heavily in improving its systems and processes to address the harm and prevent future harm.