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Computer errors denied patients cover

Rob Stock rob.stock@stuff.co.nz

Computer-generated stuff-ups led to the country’s largest life insurer unfairly declining claims policyholders made to pay for potentially life-saving operations on clogged arteries, a high court judgment reveals.

AIA has been ordered to pay $700,000 in penalties by the High Court in Auckland, but a judgment released by Justice Michael Robinson reveals the cost of the insurer’s computer errors to people with AIA insurance policies who were overcharged premiums, or told they had cover, only to be told at claims time that they didn’t.

Justice Robinson said 383 of AIA’s customers were overcharged premiums, or had cover wrongly ended by AIA, since April 1, 2014.

‘‘The average financial harm per customer was $1092.60, but seven of these 383 customers were underpaid cover in amounts between $19,104.36 and $46,044.’’

Four of AIA’s policyholders whose claims were wrongly denied were making claims to pay for angioplastiesto open blocked coronary arteries.

The value of those claims ranged between $26,882 and $36,052, the judge said.

AIA has since paid those claims, but Justice Robinson said customers who were declined cover to which they were entitled, or had been told they were entitled, would have suffered harm at an inherently difficult time in their lives.

The judge accepted that the errors made by AIA were inadvertent. But he also acknowledged the Financial Markets Authority Te Mana Tātai Hokohoko’s frustration that AIA took more than 10 years to finish paying out wronged customers.

The authority had argued the maximum penalty AIA could face was $15 million, but said the starting point should have been $1m to $1.2m.

The judge said AIA used a computerbased policy administration system, which undertook some automated actions, including calculating premiums and sending out update letters.

Some of the automated letters contained errors that mislead customers, Justice Robinson found.

Between January 2013 and February 2015, letters were sent to 2800 customers telling saying some ‘‘passback’’ benefits had been added to their policies, when in fact they had not.

These benefits included cover for conditions such as critical cancer, Alzheimer’s disease, intensive care treatment and heart valve replacement.

‘‘At least five of those 2800 customers made claims for the ‘Passback Benefits’ described in the passback Letters. AIA wholly or partially declined on the basis that their policies did not include the Passback Benefits,’’ the judge said.

Since at least 2009, AIA sent anniversary letters to some customers with incorrect policy termination dates, resulting in some people paying premiums for cover that no longer existed. Other customers had claims payments wrongly ended too soon, the court found.

These errors cost policyholders $272,445.

The third automatic systems error happened in late 2014, when a change made by AIA caused its policy administration system to increase some policyholders’ cover by more than the rate of inflation, resulting in them paying more premiums than they should have.

This error cost 239 customers a total of $21,606.33 in premiums.

The authority took the case after the insurer itself reported the breaches to the authority, as part of a review of life insurers by the authority and the Reserve Bank in 2018. Authority head of enforcement Margot Gatland said the case was the second taken under the Financial Markets Conduct Act, introduced to lift standards among banks and insurers, and promote public confidence in the sector.

Justice Robinson ruled AIA had undermined public confidence:

‘‘This outcome reiterates that financial institutions will be held to account if they fail to sufficiently invest in systems, controls and processes that ensure all customers are treated fairly.’’

Business

en-nz

2022-10-01T07:00:00.0000000Z

2022-10-01T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/281779928006421

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