UPDATED: Youi fined $320,000 for misleading sales practices

UPDATED South African-owned insurer Youi has been sentenced to a $320,000 fine out of a potential maximum penalty of $9 million in the Auckland District Court after receiving hefty discounts for agreeing to plead guilty to 15 representative charges relating to misleading sales practises in New Zealand.

The Fair Trading Act charges, brought by the Commerce Commission, included misleading its customers about their ability to get online quotes, telling them their bank or credit card details were required in order to get a quote, and asking for payment for unsolicited policies.

The maximum penalty under the Act is $600,000 per charge but Judge Philip Recordon said the Commerce Commission agreed to significant discounts for Youi pleading guilty, the remorse shown, reparations made to victims, and changes to its processes. The $100,000 fine Youi incurred from the Insurance Council for bringing damaging the insurance industry's reputation and breaching its membership obligations was also discounted from the penalty by the commission.

A spate of customer complaints were made to the commission from March 2015 to February 2016 though the charges date back to 2014 when the insurer first launched into the New Zealand market.

"Our investigation focused on 66 sales calls where complainants alleged they had been misled," commissioner Anna Rawlings said in a statement. "In the worst case scenario, Youi was able to attract a customer and obtain their contact details through pretext, set up policies they did not want and then charge them without permission. At the same time, Youi made it difficult for them to cancel the policy and get refunded."

In a media statement, Youi said it accepted the fine for errors it made in relation to its website and sales processes and had already restructured its systems, processes and employee incentives to improve service to its 50,000 plus customers in New Zealand. The loss-making Youi claims to have won just over 1.5 percent of the local market by premium for home, contents and car insurance.

Chief executive Danie Matthee refused an interview, limiting his comment to the press release.

He said Youi had fully refunded all customers that were impacted by the misleading practices which amounted to less than 0.2 percent of policies issued since it launched in New Zealand.

"While this behaviour was never condoned by the company, we have acknowledged that errors were made and that even one error of this nature was too many," he said.

He said the insurer was confident the same problems won't happen again.

Judge Recordon said it was clear from Youi's submissions that the mis-selling was "not planned, deliberate or intentional" and that some of the criticisms of the company reported in the media were "inaccurate and unfair."

"Quite simply it has said 'yes, we stuffed up, but we're going to make sure we take all sorts of steps in future to make sure there's no chance of that happening again and we're sorry'," he said.

Personal finance journalist Diana Clement, who broke the story of Youi's selling practices which led to the Commerce Commission investigation, was allowed to make a statement as a victim, given she was wrongly invoiced for a quote given online. The insurance inquiry was made in her role as a journalist investigating complaints against the company and Clement said she only noticed the $592 charged to her bank account by Youi when she checked it a month later.

She said that made her angry because, if she hadn't noticed the charge, it would have automatically renewed a year later.

After the agreed penalty was confirmed by the court, MS Clement said she felt vindicated at the outcome because it had taken "so long to get my investigation into print and I was not listened to by people until the Commerce Commission became involved."

She questioned the $100,000 Insurance Council fine being discounted from Youi's penalty for the 15 representative charges, saying one related to damage to the industry while the other related to damage to consumers.

The judge said the commission may want to explore emotional harm repayments to victims in addition to reparation in future.

Ms Clement also questioned how the "systemic ambush selling" could not be seen as representative of company policy when the complaints related to Youi call centres in New Zealand, Australia and South Africa. "The same script was used by all of them," she said. "If this was not company policy, how could three call centres in each country have the same approach and how could management say it was not aware of it?"

Australian media reported in late August that horror stories about alleged Youi misleading sales practices across the Tasman had flooded in following publicity over the New Zealand cases. Youi rejected the accusations.

The Australian Securities & Investment Commission said it had held talks with the company but it neither confirms nor denies whether any investigation is under way. Youi has said no investigation is taking place in Australia.

(BusinessDesk)