Southern Cross pinged for overcharging

Southern Cross Medical Care Society and Southern Cross Pet Insurance are the latest insurers to admit overcharging customers.

The Financial Markets Authority Te Mana Tātai Hokohoko (FMA) has issued warnings to Southern Cross Medical Care Society, which provides health insurance, and Southern Cross Pet Insurance, for failing to apply advertised premium discounts to some of their customers.

The overcharging involved nearly 10,000 customers from the two related insurers, and the insurers collecting $586,055 too much in premiums. Some policyholders didn’t get the discounts they were due for a period of 17 years, the regulator said.

The insurers had accepted they breached the fair dealing provisions of the Financial Markets Conduct Act by making false or misleading representations, the FMA said.

Other insurers that have had to compensate policyholders for overcharging include

Suncorp, AA Insurance, IAG, Cigna, ANZ and MAS.

“The representations relate to the failure on each entity’s part to correctly apply advertised discounts to affected customers’ invoices, resulting in overcharged premiums,” the FMA said.

The regulator said the overcharging was due to “poor controls and/or technical errors” at the insurers.

Southern Cross Pet Insurance told the FMA about the overcharging in November 2022.

“Following these disclosures, further inquiries from the FMA and an internal review in the wider Southern Cross Group, the extent of the contraventions was established,” the FMA said.

Southern Cross Health Society chief executive Nick Astwick said the organisation operated as a not-for-profit which had the intention of “always to do the right thing by members and customers”.

“We’re extremely disappointed that on this occasion we didn’t give our members and customers the value they were expecting, falling short in delivering what they were entitled to.

We moved quickly to put it right and we know we simply need to be better for our members,” he said.

The pet insurer overcharged 7542 customers by a combined $424,508 after it failed to apply all the discounts it should to those who had more than one pet covered, paid by direct debit, and were a health insurance policyholder at Southern Cross Medical Care Society.

Southern Cross Medical Care Society had failed to apply some free child discounts, healthy lifestyle discounts, and low claims discounts, the FMA said, overcharging 1957 customers by a combined $161,547.

The errors affected 1.2% of the pet insurer’s customers, and 0.2% of the health insurer’s customers. Both entities had been working to pay customers back, the FMA said.

The pet insurer had refunded 96% of its affected customers, while the health insurer had refunded 90% of its affected customers.

Peter Taylor, the FMA’s director of specialist supervision, said a warning was sufficient punishment as the insurers had cooperated, paid compensation, and there was no evidence of any deliberate misconduct.