New Zealand insurer FMG has agreed to pay $NZ2.1 million ($1.8 million) and to remediate thousands of customers after making misleading representations in relation to some policies.

Regulator the Financial Markets Authority says some customers with home contents insurance were charged additional premiums for specified items that were already covered in the policy.

In a separate issue, incorrect inflation adjustments were applied to sums insured. 

“Insurers must ensure their representations to customers about cover, premiums, adjustments and policy benefits are accurate, clear and consistent with policy terms,” head of enforcement Margot Gatland said.

“Following our investigation, we determined that FMG’s representations to customers were false or misleading and caused customer harm.”

FMG, which self-reported to the regulator, says affected clients have been contacted and about $NZ5.3 million ($4.5 million) will have been paid in refunds and claim top-ups once the issues are fully remediated. 

Refund processes will be substantively complete by the end of next month, it says.

“On behalf of the mutual, I sincerely apologise to our clients and members for these historical issues and for the inconvenience they have caused,” CEO Adam Heath said.  

“FMG has strengthened our systems, processes and controls to help prevent similar issues occurring again in future.”

FMG Insurance and Farmers’ Mutual Group (together FMG) admitted fair dealing breaches and agreed to pay the $NZ2.1 million ($1.8 million) through an enforceable undertaking in lieu of a pecuniary penalty.

The regulator says specified item failings happened between 2012 and 2024, affecting 3904 customers. The indexation issues occurred from 2014 to 2024 and resulted in tens of thousands of customers being over- or undercharged.

Ms Gatland has acknowledged FMG’s co-operation and its commitments. 

“The FMA will continue to prioritise fair customer outcomes and take action where misleading conduct occurs in the financial services sector,” she said.