The Financial Markets Authority (FMA) has issued a public warning to Aioi Nissay Dowa Insurance (AIOI), saying the insurer failed to apply advertised discounts to customers buying motor vehicle insurance policies — an error that led to more than 5,000 customers being overcharged close to $700,000.
The regulator said the issue involved customers who should have received AIOI’s multi-vehicle discount and/or multi-policy discount, but did not, resulting in higher premiums than advertised. The affected policies were sold through various vehicle dealerships and online.
According to the FMA, AIOI overcharged 5,055 customers almost $700,000 over nine years, a scale of impact the authority said warranted a public response - albeit this limited warning action - despite the absence of evidence of deliberate misconduct.
According to the FMA's media release, the matter came to the regulator's attention after Aioi Nissay Dowa Management New Zealand Limited — AIOI’s New Zealand subsidiary responsible for providing services to customers — notified the regulator in March 2024. The subsidiary reported a “discount issue” affecting policies that did not receive the relevant discounts.
FMA Executive Director of Response and Enforcement Louise Unger said the root cause was linked to flawed processes that failed to correctly identify customers entitled to the discounts.
“Manual processes used to identify customers with more than one policy failed and customers eligible for discounts were not identified,” Unger said. “This resulted in AIOI issuing incorrect invoices and contravening the fair dealing provisions set out in Part 2 of the FMC Act, with a significant number of customers impacted by the issue.”
Unger said the case served as a reminder of the regulator’s expectations for insurers and other financial institutions in how they price and administer products, particularly when discounts form part of the consumer proposition.
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“Customers should rightly expect to be treated fairly and that promises made to them will be honoured,” she said. “We expect financial institutions to invest in quality systems and controls that enable them to deliver on advertised promises and to also identify issues and be capable of resolving those issues effectively and quickly.”
She added that institutions should be conducting regular checks to ensure products perform as described, not just at point of sale but across the life of a policy.
“We also expect that financial institutions are proactively reviewing their products and services to ensure that they perform in the way they are described,” Unger said.
The FMA said it has been consistent in recent years in warning industry players about accuracy and transparency in premium calculations and administration — and that discount errors remain a recurring theme.
“Over the past several years, the FMA has clearly communicated its expectations around ensuring premiums are accurate, transparent, and administered correctly,” Unger said. “However, we continue to encounter issues with discounts and premiums not being correctly applied.”
Despite the finding of fair dealing breaches, the regulator acknowledged AIOI’s conduct once the problem was identified. The FMA said AIOI self-reported the matter three days after it became aware of the issue and moved to identify all affected policyholders, notify them, and make remediation payments.
The insurer has also taken steps intended to prevent the problem from recurring, the FMA said, though it did not outline what changes were made.
Importantly, Unger said the regulator had found “no evidence of deliberate misconduct”. Instead, the failure was attributed to “either poor controls or ineffective systems” — language that underscores the FMA’s focus on operational capability as a key driver of fair outcomes for customers.
Unger said a public warning was the appropriate regulatory response in the circumstances.
“The FMA has a number of tools available, and we consider that a public warning is appropriate in this case,” she said.
