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Credit card payback insurance was of little value and the big banks didn’t stop selling it.
Cigna Life Insurance and its subsidiary Onepath Life are paying $180,000 to the Financial Markets Authority Te Mana Tātai Hokohoko for their part in the credit card abuse scandal that brought ANZ to court.
Last year, ANZ was fined $280,000 for selling some customers credit card prepayment insurance they were too old to claim and charging others for “duplicate” policies that gave them offered no additional cover.
However, ANZ’s credit card repayment insurance was provided by Onepath Life, which was sold to Cigna in 2018.
Now Cigna and Onepath Life have admitted they violated the fair dealing provisions of the Financial Markets Conduct Act in relation to the sales and errors that brought ANZ to court.
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The FMA said Cigna and Onepath Life should have recognized ANZ’s mistakes.
The issue came to light when the Financial Markets Authority (FMA), the Reserve Bank of New Zealand, conducted a review of life insurers’ behavior after a similar review of banks’ behavior.
During this review, OnePath and Cigna notified the FMA of the issues, said Liam Mason, FMA General Counsel.
Most banks continue to issue joint credit cards but may charge an additional fee. ANZ no longer issues joint credit cards. Going into debt with a trusted person using a credit card carries risks.
Most bank-sold life insurance policies today are offered by third-party insurers, such as Cigna and Fidelity Life, who are not owned by the banks selling them.
Although OnePath and Cigna did not directly provide misleading information to their customers, they admitted liability for the misleading information provided by ANZ, acting as their agent, Mason said.
Cigna is committed to developing and maintaining effective policies, systems and processes to prevent further failures in treating customers fairly, Mason said.
DELIVERED
Liam Mason, general counsel at the Financial Markets Authority, criticized credit card prepayment insurance at a conference in 2019, saying: “We see some being sold to customers without them understanding the limitations.”
OnePath is no longer trading, he said.
“This enforceable obligation sends a message to the industry that product providers, underwriters, distributors and intermediaries have a shared responsibility to ensure customers are treated fairly,” Mason said.
“OnePath and Cigna received regular updates from ANZ about the affected policies and should have had systems and controls in place to identify the issues and take steps to ensure their distributor was delivering their policies correctly.”
All major banks have stopped selling credit card repayment insurance, which the FMA says was worth little.
Criticism of credit card repayment insurance was more muted in New Zealand than in Australia.
But in 2019, Mason, then the FMA’s director of regulation, said there were “very limited circumstances” where credit card chargeback insurance was likely to be of real value to consumers.
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