IAG to pay up to $3.5m after policy miscalculation

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.

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3 Comments & Questions

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I hardly consider less than $10.5K adequate recompense for the regulator.
What compensation also for the stress, aggravation & extra work some clients most surely were put to?
Might have been better for the whole matter to have been put before the courts so the public were made more aware that insurers and not just fraudulant claimants can be guilty also.

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The whole Insurance industry is a sham... the companies are deliberately slowing down proceedings because of the simple fact THEY DON'T HAVE THE MONEY... the float is invested and when a major disaster hits insurers just dont have the capital on hand that they SHOULD do. NZ need tougher laws to stop this.

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Some insurers were caught with their knickers down...which is why they no longer exist. MOST had robust reinsurance in place. If your house is burned down, or burgled, or someone prangs your car, or you need specialist medical for your kids, or income protection or redundancy cover in this economic climate...then you will know it's not a scam.

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