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Elevate Magazine
October 8, 2024

AA Insurance Fined for Misleading Discounts and Overcharging Customers

aa insurance fined for misleading discounts and overcharging customers

AA Insurance has been fined millions at the High Court for failing to apply multi-policy and membership discounts, as well as guaranteed no-claims bonuses.

AAI failed to apply multi-policy and membership discounts correctly, affecting 112,463 customers who were overcharged around $4.89 million. Marketing materials suggested that existing policyholders would receive immediate discounts when adding new policies, but the actual system applied these discounts only at policy renewal. 

The insurer also misled customers regarding its guaranteed no-claims bonus, claiming it was available to certain eligible customers “for life.”

AA Insurance also did not apply promised discounts for New Zealand Automobile Association (NZAA) members, impacting 90,129 customers and resulting in overcharges of about $2.95 million.

Justice Laura O’Gorman ruled that AA Insurance violated Section 22 of the Financial Markets Conduct Act (FMC Act) and imposed a monetary penalty starting at $9.5 million. After applying a 35% discount, the final penalty was set at $6.175 million.

FMA’s head of enforcement, Margot Gatland, said: “The $6.175 million penalty against AA Insurance reflects the sheer scale of customers affected and the level of harm caused.”

AA Insurance acknowledged its mistakes, with Chief Executive Michelle James—who was not in charge during the time customers were overcharged—stating that the company had proactively reported these errors to the regulator.

“We have apologised for the errors made and, between 2020 and 2022, carried out comprehensive remediation programmes to fully refund more than $15.6 million to past and present customers, including with interest,” she said.

AA Insurance’s issues were revealed during a time when the Financial Markets Authority (FMA) and the Reserve Bank of New Zealand (RBNZ) were closely examining insurers through a conduct and culture review.