Enforcement
FMG overcharged customers for up to 12 years before anyone noticed, and paid back 2.5 times its penalty
Source: FMA, FMG admits to making misleading statements and makes payment of $2.1 million
FMG charged customers extra to name items that were already covered, and is paying them back $496 each on average. A second error, in its yearly cover increases, works out at about $62 a customer. The refunds total about $5.3 million, two and a half times the $2.1 million FMG paid instead of a fine, for errors that ran up to 12 years.
By Henry Smith · Insurers · 2026-02-09
What this means for you Two pricing errors at FMG ran undetected for up to 12 years and affected 58,546 customers. For 480 of them the mistake only showed up at claim time, when the cover amount on their policy turned out to be wrong and the claim had to be topped up. The amounts were far too small to spot on a renewal notice, so catching this was only ever going to happen inside the insurer.
FMG charged thousands of customers extra to name valuable items on their contents policy. The naming bought them nothing, because those items were already covered. Each of those customers is now getting back $496 on average (FMA, 9 February 2026, retrieved 20 August 2026).
A second error, in the way FMG lifted cover amounts each year, works out at about $62 a customer. The Financial Markets Authority, the government regulator for financial firms, published the raw totals for both errors. It never did the division, and never added them together. They come to roughly $5.3 million going back to customers, against the $2.1 million FMG paid the regulator (FMA, 9 February 2026, retrieved 20 August 2026).
The real story is not the size of either error. It is how long an insurer can price a policy wrongly before anyone notices, including the insurer. Here it ran up to 12 years.
What did FMG get wrong?
On 9 February 2026 the FMA announced that FMG Insurance Limited and Farmers' Mutual Group, trading together as FMG, had admitted misleading their customers. That breaks the fair dealing rule in the Financial Markets Conduct Act, which stops financial firms telling customers things that are not true. FMG agreed to pay $2.1 million instead of a court-imposed fine, and it reported the problem itself (FMA, 9 February 2026, retrieved 20 August 2026).
The deal is an enforceable undertaking, a binding promise the regulator can accept rather than take a company to court.
The first error was about named items. Between 2012 and 2024, some household contents customers paid an extra premium to list particular belongings on their policy. Listing them changed nothing, because the general contents cover already paid out for those items anyway.
The second error was about indexation, the yearly increase most policies apply to your cover amount so it keeps pace with rising prices. Between 2013 and 2024, FMG applied a flat percentage increase every year. Some of those policies promised an increase tied to inflation instead. Others promised no automatic increase at all.
Here is what each error cost. The refunds include GST and use of money interest, which compensates customers for the years FMG held money that was not its own.
| Measure | Naming items already covered | Yearly increases that broke the wording |
|---|---|---|
| Years it ran | 2012 to 2024 | 2013 to 2024 |
| Customers counted | 3,904 | 54,642 |
| Due a refund | 3,904 | around 26,000 |
| Paid back | about $1,936,000 | about $3,380,000 |
| Average per customer counted | $496 | $62 |
| Claims topped up | 5, about $6,000 | 480 |
Counts and totals from the FMA (9 February 2026, retrieved 20 August 2026), covering 1 April 2014 to 2024. The averages are our division of those figures.
So the first error cost eight times as much per person as the second, yet the release sets the two side by side as though they were the same size.
Was it enough money for anyone to notice?
Now divide by time. The counted period runs from 1 April 2014 to 2024, roughly ten years (FMA, 9 February 2026, retrieved 20 August 2026).
Over that stretch, the bigger error works out at about $50 a year. The smaller one comes to about $6 a year (QuoteHub arithmetic on the same FMA figures, retrieved 20 August 2026). Six dollars a year is one flat white. Nobody reads a renewal notice closely enough to find it. Fifty dollars sits buried inside a premium that moves more than that in an ordinary year.
So how long can an insurer overcharge you before anyone notices? At these amounts, indefinitely, until the insurer's own systems catch it. FMG's systems took 11 to 12 years.
Who actually pays the $2.1 million?
Add up everything going back to customers, including the topped-up claims, and the total is about $5,322,000. FMG paid the regulator $2.1 million. So customers are getting back about two and a half times what the government collected (FMA, 9 February 2026, retrieved 20 August 2026, arithmetic ours).
There is a twist the release does not mention. FMG is a mutual, "100% owned by our rural members" in its own words (FMG homepage, January 2025 archive snapshot, retrieved 20 August 2026). A mutual has no outside shareholders to absorb a hit like this. The $2.1 million comes out of the members' shared funds, and the members are the customers. The overcharged group is helping to pay for its own compensation.
How does this compare with IAG?
The nearest comparison is IAG. In October 2025 the High Court fined it $19.5 million for the same kind of breach (FMA, 6 October 2025, retrieved 20 August 2026).
About 269,000 IAG customers had been overcharged by roughly $35 million, across 41 separate problems the insurer reported itself between September 2021 and December 2024 (FMA, 6 October 2025, retrieved 20 August 2026).
| Measure | FMG, February 2026 | IAG, October 2025 |
|---|---|---|
| How it ended | $2.1m paid instead of a fine, under a binding undertaking | $19.5m fine imposed by the High Court |
| Customers affected | 58,546 across two errors, QuoteHub sum | About 269,000 |
| Money owed to customers | About $5.32m paid back, including GST and interest | About $35m of overcharges |
| Per customer affected | About $91 | About $130 |
| Penalty per customer affected | About $36 | About $72 |
| Penalty per dollar of harm | About 39 cents | About 56 cents |
QuoteHub arithmetic on the FMA's FMG release (9 February 2026) and IAG release (6 October 2025), both retrieved 20 August 2026. The 58,546 assumes no customer appears in both FMG groups, which the FMA does not say. FMG's harm figure is money paid back including interest, IAG's is overcharges, so the last row is indicative not exact.
Per customer affected, IAG paid roughly twice the penalty FMG did. Part of that gap is structural. IAG was taken to court while FMG settled with a promise. The FMA called IAG's conduct worse than any other fair dealing case it has brought. On timing the comparison flips. IAG's problems were found and reported inside a 2021 to 2024 window. FMG's two errors each ran for more than a decade before anyone spotted them.
Why does the count start in 2014?
The first error began in 2012 and the second in 2013. Both customer counts, though, start on 1 April 2014 (FMA, 9 February 2026, retrieved 20 August 2026). That date is not a coincidence. Section 22 of the Financial Markets Conduct Act, the fair dealing rule FMG broke, came into force on exactly that day (Financial Markets Conduct Act 2013, commencement notes, retrieved 20 August 2026). So up to two years of overcharging happened before the rule it was punished under came into force. The release does not say whether that earlier money was ever repaid.
What does this mean for your cover?
Two lessons travel beyond contents insurance.
The first is about named items. Paying extra to list something only helps if it buys cover your basic policy does not already give you. Before you pay to name an item, ask the insurer to state in writing what the naming adds.
The second is about those yearly increases, and it cuts both ways. FMG's flat rate overcharged some customers and left others under-covered. That is why 480 people needed their claims topped up. The cover amount on their policy was wrong on the day they claimed (FMA, 9 February 2026, retrieved 20 August 2026). Life insurance policies commonly rise each year in the same way, so the same check belongs there. Compare this year's cover amount with last year's, then read what the policy wording actually promises. A claims readiness review is the place to do that.
The deeper lesson is about detection. At $6 to $50 a year, no customer was ever going to catch this, and FMG did not catch it for more than a decade. The realistic protection is re-testing the whole policy against the market every so often, not squinting at renewal notices. Comparing insurers forces the questions that expose bad pricing: what am I paying, for what cover, on what terms.
What we could not check
The undertaking itself is published as a 10-page scanned PDF (FMA, retrieved 20 August 2026). We could not read it by machine, so every figure here comes from the FMA's media release. That release does not say when FMG reported itself, what triggered the discovery, or how the $2.1 million was set. FMG's website blocks automated access, so its ownership wording comes from a January 2025 Internet Archive copy of its homepage.
The $496 and $62 averages include GST and interest, so the premium overcharges behind them are smaller. Averages also hide a spread the FMA has not published (FMA, 9 February 2026, retrieved 20 August 2026). The per-year figures divide by the full ten-year period, but individual customers were affected for different lengths of time. They show scale, not anyone's actual bill.
Sources
- FMG admits to making misleading statements and makes payment of $2.1 million, FMA, 9 February 2026
- FMG Enforcement undertaking, FMA, February 2026
- IAG to make pecuniary penalty payment of $19.5 million for widespread failures, FMA, 6 October 2025
- Financial Markets Conduct Act 2013, section 22 and commencement notes, New Zealand Legislation
- FMG homepage, FMG, January 2025 snapshot via Internet Archive
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