The Financial Markets Authority cautions two Southern Cross entities for neglecting to apply advertised discounts on insurance products, causing almost $600,000 in overcharged premiums

The Financial Markets Authority (FMA) is cautioning Southern Cross Medical Care Society and Southern Cross Pet Insurance for neglecting to apply the advertised discounts to their insurance products.

The market watchdog says both entities have accepted they had breached the fair dealing provisions of the Financial Markets Conduct Act by making false or misleading representations.

The representations concern the failure of each entity to correctly apply advertised discounts to affected customers’ invoices, resulting in overcharged premiums, the FMA says.

Southern Cross Pet Insurance initially reported “some of the contraventions” to the FMA in November 2022, followed by more additional details later on.

“Following these disclosures, further enquiries from the FMA and an internal review in the wider Southern Cross Group, the extent of the contraventions was established,” the FMA says.

The market watchdog says it determined that the cause of each issue was due to poor controls and/or technical errors.

Southern Cross Pet Insurance failed to correctly apply its additional pet discount, direct debit discount and Southern Cross membership discount.

Southern Cross Medical Care Society failed to correctly apply its free child discount, healthy lifestyle rewards discount and low claims discount. 

The total amount of overcharged Southern Cross Pet Insurance premiums was $424,508 and affected 7,542 customers – approximately 1.28% of its customer base. 

The total amount of overcharged Southern Cross Medical Care Society premiums was $161,547 across 1,957 customers which accounts for approximately 0.2% of its customer base. 

The total amount in overcharged premiums is $586,055.

“Both entities have completed remediation programmes. Southern Cross Pet Insurance has refunded 96% of its affected customers while Southern Cross Medical Care Society has refunded 90% of its affected customers,” the FMA says.

The FMA’s director of specialist supervision Peter Taylor says the Southern Cross entities have “cooperated proactively” with the FMA and there was no evidence of “any deliberate misconduct”. 

“Yet, the entities failed to apply the promised discounts over a prolonged period, in SCMCS’s case some 17 years,” he says.

“The FMA considers the wider Southern Cross Group did not provide adequate information to its customers when it publicly acknowledged the issues concerning its failure to properly apply the discounts.”

The market watchdog says entities need to have better systems and controls in place to identify and prevent issues as early as possible and to be transparent with customers when problems arise.” 

It also emphasised the necessity for entities to establish better systems and controls so issues could be identified at the earliest opportunity.

In a statement, Southern Cross Health Society chief executive officer Nick Astwick says “mistakes can unfortunately happen” with the size of a business like Southern Cross Medical Care Society.

He says the Health Society pays more than $6.5 million dollars in health insurance claims every business day and Southern Cross Pet Insurance pays $100,000 in claims daily.

“We’re extremely disappointed that on this occasion we didn’t give our members and customers the value they were expecting, falling short in delivering what they were entitled to,” he says.

The insurer says both businesses carried out a comprehensive process of contacting and refunding members and customers affected by the errors, which were uncovered between 2022 and 2023.