The High Court has ordered Medical Assurance Society New Zealand Limited (MAS) – the mutual company that owns Medical Life Assurance Society and Medical Insurance Society – to pay a reduced penalty of $2.1 million.
As reported earlier this year, the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – launched proceedings against MAS for breaches of the Financial Markets Conduct Act 2013. The breaches included miscalculation of benefit payments and failure to correctly apply inflation adjustments, multiple policy discounts and no-claims bonus discounts.
Having accepted liability and co-operated with the regulator, MAS was granted a 30% discount on what would have been a $3 million penalty.
“This results in a final total penalty of $2.1 million,” Justice Churchman said. “I am satisfied that this is a penalty set at a level which condemns the conduct in which MAS was involved and acts as a sufficient deterrent. It is also a penalty which recognises the significant public benefit of the parties reaching an agreed figure and thereby avoiding time-consuming and costly litigation.
“The final penalty is an amount which MAS acknowledges is significant to it and its members, but which MAS believes is appropriate in all the circumstances, including to bring this matter to a speedy and efficient conclusion.”
In his judgment, Mr Justice Churchman noted that customers are entitled to rely on the accuracy of their insurer’s communications in its systems, but cannot do so if they have to double check prices and invoices. As a result of its failings, MAS is alleged to have made false and/or misleading representations to certain customers.
“MAS’s failings were widespread across its insurance business due to fundamental flaws in the design of MAS’s systems and processes, which overtly relied on manual processes with no detective controls,” said FMA head of enforcement Margot Gatland after the penalty hearing.
“The issues caused significant harm to a significant number of MAS customers, more than 16,000 across all issues, and the harm caused by the benefit payment issue affected customers who were at a particularly vulnerable time in their lives. Although MAS is a relatively small insurer by market standards, the net gain to MAS from its breaches was significant”.
