New Zealand’s largest insurer, IAG New Zealand Limited, has been penalised $19.5 million by the High Court for historical failures to correctly apply discounts to some customers and miscalculation of government levies.
The Financial Markets Authority (FMA) launched an investigation into IAG’s conduct following self-reports from the company between September 2021 and December 2024.
The breaches affected approximately 269,000 customers and led to overcharges totalling around $35 million.
IAG NZ — who operate major insurance brands State, AMI, and NZI — admitted to making false and misleading representations about its insurance products, including incorrect premium pricing and the failure to apply key discounts across policies sold through its business divisions and distribution partners.
FMA response and enforcement executive director Louise Unger said the IAG’s 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 IAG’s breaches as “the most aggravating feature of its conduct”, noting that the company 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.
While the final penalty reflected discounts for IAG’s cooperation, early admissions, and customer remediation efforts, the Court emphasised the seriousness of the insurer’s failures.
IAG NZ self-reported 41 issues to the FMA in total. Eight causes of action were pleaded in court, covering 10 of the most significant breaches.
The remaining 31 issues, which were expected to result in a further $21 million in customer remediation, were not part of the formal claim but were included in the schedule to provide context.
Unger said the FMA would continue to take action against misleading practices to protect consumers and uphold trust in New Zealand’s financial system.
“We will continue to respond to misleading practices to ensure New Zealand has a fair financial system.”
IAG acknowledged the High Court penalty, recognised it historically made mistakes, and said it had “invested heavily” in new systems and processes, with significant changes ongoing.
Chief executive Amanda Whiting said the company’s priority had been to “put things right” for impacted customers by offering a sincere apology and issuing refunds.
She added the company was “doing everything” to prevent a recurrence of these issues.
“The underlying issues have been fixed, and all affected customer’s repayments were completed earlier this year.”
