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Insurance company to refund customers after Fair Trading Act

Insurance company to refund customers after Fair Trading Act


An insurance company has admitted breaching the Fair Trading Act by failing to adequately disclose that an administration fee would be charged for cancelling private vehicle insurance.

Protecta Insurance has written to 840 policy holders who were incorrectly charged from January 2007 to March 2011. The company has acknowledged its mistake and will refund approximately $44,471 to those policy holders. It has also changed its policy wording to clarify that an administration fee will be charged for cancellation.

Protecta Insurance, a New Zealand underwriting agency which has headquarters in Auckland, provides a range of insurance products through channels such as motor traders and finance companies, and directly to the public.

The Commerce Commission has officially warned Protecta Insurance for misleading conduct under the Fair Trading Act.

“All costs and fees associated with goods or services must be clearly disclosed to customers before they buy so that they make an informed choice about the cost of what they are buying,” said Greg Allan, Commerce Commission Competition branch manager.

The Commission investigated after a former policy holder complained about being charged a fee for cancelling a policy. Protecta Insurance did not disclose the administration fee in the terms and conditions of the policy, or on its website, or at the time the insurance was purchased.

“Protecta acknowledged this breach of the Fair Trading Act when we contacted them, and they also offered to refund all affected policy holders. That’s not only a good result for Protecta’s customers but for taxpayers. Protecta’s cooperation means we achieved a solution without a lengthy and costly investigation and possible court proceedings,” said Mr Allan.

The case illustrates the need under the Fair Trading Act for businesses to fully disclose charges to customers.

Background

Fair Trading Act 1986

Under the Fair Trading Act, it is an offence to make a false or misleading representation. Section 13 (i) states:

No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods and services, -

i) Make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

Breaches of the Fair Trading Act 1986 may result in prosecution in court. Companies found guilty of breaching the provisions of the Fair Trading Act may be fined up to $200,000 and individuals fined up to $60,000 for each offence. However, only the courts can decide whether the Act has been breached.

ends

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