BUSINESSDESK: IAG New Zealand, the insurer that bought AMI Insurance for $380 million, has agreed to pay up to $3.5 million after finding a miscalculation in last year's Canterbury earthquake claims in some historical home and contents policies.
The Sydney-based insurer told the Commerce Commission last year about the mistake, which meant it breached the Fair Trading Act with certain policies under the State, Lantern, Corporate Partners and NZI brands, it says.
IAG miscalculated the sum insured on 643 policies dating back as far as 1980 and has paid out about $1.35 million on those, with a further $626,000 from 105 other claims under review.
About 130 current claims will incur extra payments, which the insurer estimates will be fall between $1 million and $1.5 million, and a further 150,000 customers will need their policies adjusted.
The insurer will also pay the regulator's costs of $10,406.
Commerce Commission competition general manager Kate Morrison commended IAG for advising the regulator of the problem and "for being prepared to put matters right".
"Through its proactive response IAG has avoided a potentially lengthy and costly investigation and affected customers have been, or will be, compensated."
IAG will commission an independent final report prepared by the end of September next year confirming substantial completion of its repayments as at July 31, with the total payments made, the number of policyholders who have not received payment and an opinion on whether the terms of the agreement with the regulator have been met.