Youi fined $320,000 for misleading sales practices

Thursday 15th December 2016

South African-owned insurer Youi has been sentenced to a $320,000 fine in the Auckland District Court today after agreeing to plead guilty to 15 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 and Youi made a provision of $350,000 for the fine in its 2015 financial accounts filed with the Companies Office.

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."

Today’s sentencing follows the Insurance Council fining the insurer $100,000, the harshest penalty it could impose short of ousting it as a member, in October.

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.

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 it was confident the same problems won’t happen again.

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 underway. Youi has said no investigation is taking place in Australia.

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.

Youi’s financial accounts show it reported an $11 million net loss for the year ended June 30 compared to a loss of $14.8 million the prior year. It went through rapid growth in the past financial year, boosting premium revenue to $26.2 million from just $5 million a year earlier while insurance claims climbed to $19.4 million from $4.2 million.

Commission income rose to $9.4 million from $2.1 million the prior year.

BusinessDesk.co.nz

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