Tower Insurance has been ordered to pay a $7 million penalty after a prolonged systems failure led to more than $11 million in overcharges for thousands of its customers. The penalty was imposed by the High Court in Auckland following civil proceedings brought by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – after Tower self-reported the issue in March 2021.
Tower is one of New Zealand’s larger insurers and, according to the firm's website, the country’s only Kiwi-owned and operated general insurance provider with more than 300,000 customers across Aotearoa and the Pacific.
The firm admitted breaching section 22 of the Financial Markets Conduct Act by misleading customers in invoices about its multi policy discount (MPD) since 10 September 2016, leading to the overcharging, which continued until February 2025. It also admitted making false or misleading representations in marketing material in relation to MPDs.
According to the FMA, the incorrect discounting in invoices affected approximately 61,000 customers, or about 90,200 policies – around 11% of Tower’s total customer base. Tower has since carried out remediation and repaid more than $11.7 million.
The case centres on Tower’s longstanding MPD programme. For more than two decades, the insurer has offered a multi-policy discount to customers holding multiple qualifying policies. In 2017, Tower entered into a settlement agreement with the Commerce Commission, under which it agreed to fix its policy system after a historic issue that had caused miscalculation of MPDs.
In the penalty decision, Justice Gorman noted the regulator’s concerns about Tower’s performance following that earlier settlement, saying the judge accepted “the FMA is justifiably critical that the previous settlement was intended to ensure that Tower sufficiently invested in and maintained adequate systems and processes to ensure any MPD is applied correctly, including through any migration process.”
The FMA said the core problem was Tower’s failure to ensure its systems could reliably deliver the discounts it was using to attract customers.
Margot Gatland, the FMA’s Head of Enforcement, said: “Tower’s issues stemmed from deficiencies in its systems that meant the insurer failed to deliver to customers a publicly advertised discount.
“Tower used the advertised MPDs to attract and retain customers, without having systems that could reliably deliver on the promised discount.
“The FMA acknowledges that Tower self-reported the MPD Issues, co-operated with the FMA’s investigation, made admissions and carried out a comprehensive remediation programme.
“The FMA’s statutory objective is 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 consumers in financial markets.
“Confident participation in New Zealand’s financial markets can only exist if an intrinsic level of market integrity exists. This is why we continue to respond to fair dealing breaches like this.”
The outcome underscores the FMA’s willingness to pursue fair dealing breaches even where firms self-report and remediate, while also highlighting the regulatory expectation that long-standing system issues – particularly those affecting pricing and discounts – must be fully resolved and robustly monitored.
