Insurance Council dishes out largest ever penalty to Youi for using misleading sales tactics, ahead of it being sentenced for breaching the Fair Trading Act

The Insurance Council of New Zealand (ICNZ) is issuing Youi with its largest penalty to date, for using misleading sales tactics.

The disgraced South African insurer is being fined the ICNZ’s maximum financial penalty of $100,000 and has been warned it risks losing its membership if it steps out of line again.

The Council’s Board found Youi breached its rule that requires members to conduct their business in accordance with the Fair Insurance Code and in a “legal, honourable and proper manner”. 

The ICNZ will use the $100,000 to fund initiatives to improve consumers’ financial capability. 

The industry body’s disciplinary action comes further to Youi pleading guilty, in the Auckland District Court, to 15 Fair Trading Act charges brought against it by the Commerce Commission.

An investigation undertaken by freelance journalist, Diana Clement, and published on interest.co.nz, largely sparked the Commerce Commission's investigation. The charges Youi's admitted to include:

- Making false or misleading statements on its website regarding consumers’ ability to obtain a quote online;

- Making false or misleading statements to consumers including telling them their bank or credit card details were required to provide a quote;

- Demanding payment or debiting consumers’ bank or credit cards without their expressed permission; and

- Issuing invoices in relation to unsolicited insurance policies that did not specify the consumer was under no obligation to pay.

Youi is expected to be sentenced on December 15th.

'Unprecedented'

ICNZ President Chris Black says the Council's actions are "unprecedented in terms of disciplining a member like this… We are setting a stake in the ground in terms of what our expectations are and what happens if you don’t meet those expectations."

He says: “The Board of ICNZ considered the most severe sanction it could impose – termination of Youi’s membership of ICNZ – but decided on a severe reprimand, the maximum financial penalty allowable and a warning that a recurrence would lead to termination."

Youi accepts that its actions are in breach of its membership obligations and have damaged the reputation of the industry.

Asked whether he has concerns Youi’s misleading sales tactics are simply a part of its business model, as it’s also been accused of charging people seeking quotes in Australia, Black says: “If there is anything impacting on our market here, we are acutely interested in that. But we’re not looking to form a view on what happens in other jurisdictions…

“If those things are going on offshore and they are impacting on the New Zealand market, we’d be very interested in that.”

'Ruling a line under this incident'

Asked how closely the ICNZ will keep monitoring Youi from here, he says: “We’re looking to rule a line under this particular incident, but we have the same standards for Youi going forward, as we have for all other members.”

In deciding not to terminate Youi’s membership, the Board took into account:

- Youi’s restoration of harm and unreserved apology to those customers affected;

- Youi’s action in reviewing and changing its systems, processes and monitoring to prevent a recurrence;

- Absence of any previous misconduct;

- Youi’s remorse and acceptance of the sanction being imposed;

- Youi’s co-operation with the Commerce Commission and voluntarily keeping ICNZ’s Board informed of the Commission’s investigation;

- The benefits of keeping Youi compliant with the high service standards set by the Fair Insurance Code as a member of ICNZ;

- Youi’s active contribution to the workings of ICNZ.

Black says: “ICNZ sets high industry standards for all members to follow and Youi’s business conduct has fallen well short of this expectation.

“ICNZ has put significant effort into improving the reputation of the insurance industry. It has changed its objects to that end and made significant changes to strengthen its Fair Insurance Code to raise the standards of service to consumers.”