FMG Insurance Limited and Farmers’ Mutual Group (FMG) has admitted breaching New Zealand’s fair dealing requirements over how it described and applied certain general insurance terms, and has agreed to pay $2.1 million to the Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) in lieu of a civil penalty.
The outcome follows an FMA investigation into two long‑running issues: the treatment of specified items under household contents policies and the way annual indexation was applied to sums insured. FMG self‑reported both matters and has undertaken a remediation programme for affected policyholders. The regulator found FMG had made misleading representations about its cover and premium calculations under the Financial Markets Conduct Act (FMC Act). FMA head of enforcement Margot Gatland said the case related to insurers’ obligations when communicating product terms. “Insurers must ensure their representations to customers about cover, premiums, adjustments, and policy benefits are accurate, clear, and consistent with policy terms. Following our investigation, we determined that FMG’s representations to customers were false or misleading and caused customer harm,” Gatland said.
The first issue concerned how FMG handled specified items on household contents policies. Between 2012 and 2024, some customers with household contents cover paid additional premiums to list specified items, even though those items were already included within the general contents sum insured. The specification did not change the level of cover but resulted in extra premium being charged. From April 1, 2014, to 2024, 3,904 customers were affected. FMG has paid about $1.936 million in refunds for overcharged premiums, including GST and use‑of‑money interest, and has made five associated claim top‑up payments totalling about $6,000, including GST. FMG has acknowledged that it misrepresented the need to specify items and the additional cover customers would receive, breaching sections 22(d) and 22(g) of the FMC Act.
The second issue involved how FMG adjusted sums insured over time. Between 2013 and 2024, FMG applied flat percentage increases to some customers’ maximum insurance limits, even where policy documents indicated adjustments would be inflation‑based or no longer contained an inflation clause. The FMA determined these adjustments were inconsistent with policy wording and led to both over‑ and under‑collection of premiums. A total of 54,642 customers were affected between April 1, 2014, and 2024. Around 26,000 policyholders are due premium refunds, while 480 have received claim top‑up payments. Remediation related to the indexation issue totals about $3.38 million, including GST and use‑of‑money interest.
According to the FMA, renewal communications stated that inflation adjustments had been applied and that premiums reflected the terms of the policy, and that FMG was entitled to charge the resulting amounts. FMG has admitted those statements were false or misleading, breaching sections 22(d), 22(f), and 22(h) of the FMC Act. Gatland noted FMG’s cooperation and its commitments under an enforceable undertaking, which include changes to systems and policy documentation. “The FMA will continue to prioritise fair customer outcomes and take action where misleading conduct occurs in the financial services sector,” Gatland said.
FMG has publicly accepted responsibility for the historical issues and set out its remediation timetable and control changes. Adam Health, chief executive officer, said in a statement: “On behalf of the mutual, I sincerely apologise to our clients and members for these historical issues and for the inconvenience they have caused. These issues have meant that, over time, some clients have paid more than they needed to. All affected clients have been contacted, and our refund processes will be substantively complete by the end of March 2026. Approximately $5.3 million will have been paid to clients in refunds and claim top-ups once these issues are fully remediated. FMG has strengthened our systems, processes, and controls to help prevent similar issues occurring again in future.”
Health added: “FMG remains committed to maintaining the trust of our clients and members, and we are grateful for the patience they have shown us as we worked through these issues. As an insurer that has supported rural New Zealand Aotearoa for over 120 years, FMG prides itself on honouring its promises, fixing problems when they arise, and doing all it can to learn from them.” For insurance professionals, the case illustrates operational risks associated with legacy product structures, indexation settings, and renewal wording, as well as the scale of remediation that can result when issues are not identified and corrected promptly.
The FMG outcome occurs alongside wider conduct work that the FMA has outlined in its Financial Conduct Report (FCR), first released in June 2025 as an annual report for banks, insurers, and other licensed firms. FMA chief executive Samantha Barrass said: “We are responding to the clear desire for transparency, certainty, and improved engagement with the sector by setting out our priorities and the drivers behind what we’re doing. Importantly, our report provides context and reasoning for these priorities by outlining key conduct risks and opportunities on the FMA’s radar over the next 12 months and how we plan to address them. We encourage boards, executives, and leaders to use the FCR to understand the FMA’s regulatory priorities for the coming year and consider how these insights can help their business ensure better outcomes for consumers and markets.”
The report sets out focus areas including customers’ awareness of complaint options, timely remediation when issues arise, disruption of scams, and the safekeeping of client money and assets, including work with the Ministry of Business, Innovation, and Employment (MBIE) on custody protections. It also describes initiatives to support innovation, such as implementing a single conduct licence and operating a regulatory sandbox pilot for selected fintech firms. Barrass has described the FCR as “a roadmap that sets out over the next 12 months why and how we are working towards achieving our statutory objective: to promote and facilitate the development of fair, efficient, and transparent financial markets, and to promote the confident and informed participation of businesses, investors, and consumer in financial markets.” Taken together, the FMG matter and the FMA’s published priorities outline the regulator’s focus on how insurers apply policy terms in practice, manage legacy books, and respond to identified conduct risks.
