Credit card reimbursement insurance was of poor quality and the big banks kept selling it.
Cigna Life Insurance, and its subsidiary Onepath Life, will pay $180,000 to the Financial Markets Authority Te Mana Tātai Hokohoko for their role in the credit card mis-selling scandal that landed ANZ in court.
Last year, ANZ was fined $280,000 for selling some customers credit card refund insurance they were too old to claim and charging others for ‘duplicate’ policies which offered them no additional coverage.
But ANZ’s credit card refund insurance was provided by Onepath Life, which was sold to Cigna in 2018.
Now, Cigna and Onepath Life have admitted breaching the fair dealing provisions of the Conduct of Financial Markets Act in relation to the sales and errors that took ANZ to court.
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The FMA said Cigna and Onepath Life should have spotted the mistakes made by ANZ.
The issue came to light when the Reserve Bank of New Zealand’s Financial Markets Authority (FMA) conducted a conduct review of life insurers, following a similar conduct review banks.
During this review, OnePath and Cigna informed the FMA of the issues, said FMA general counsel Liam Mason.
Most banks will still issue joint credit cards, but they may charge additional fees. ANZ no longer issues joint credit cards. There are risks in going into debt on a credit card with another trusted person.
Most life insurance sold by banks is now provided by third-party insurers like Cigna and Fidelity Life, which are not owned by the banks selling them.
Although OnePath and Cigna did not directly make misleading statements to their clients, they admitted liability for the misleading statements made by ANZ, which acted as their agent, Mason said.
Cigna is committed to developing and maintaining effective policies, systems and processes to prevent further failures to treat customers fairly, Mason said.
OnePath was no longer commercially available, he said.
“This enforceable commitment 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 policies affected and should have had systems and controls in place to identify issues and take action to ensure their distributor was applying their policies correctly.”
All major banks have stopped selling credit card refund insurance, which the FMA said was of low value.
Criticism of credit card refund insurance has been more subdued in New Zealand than in Australia.
But in 2019 Mason, then the FMA’s chief regulatory officer, said there were “very slim circumstances” in which credit card refund insurance was likely to have real value for consumers.