The Financial Markets Authority is taking insurance company Tower to court for misleading and overcharging thousands of customers nearly $10 million.
The FMA said its civil proceeds allege the company did not properly apply multi-policy discounts for about 65,000 customers from September 2016.
It has further alleged Tower misled policy holders about which policies qualified for discounts and when they would be applied.
FMA head of enforcement Margot Gatland said Tower was another insurance company with flawed IT systems and a lack of adequate controls.
"These proceedings are another example of where an insurer has failed to invest in the systems, controls or governance processes to ensure that where errors occur, they are picked up quickly and fixed, and customers are remediated in a timely way."
"A significant number of customers have been overcharged over a long period as a result of Tower's failure to address these problems."
Although the current proceedings relate to actions from 2016, Tower fell foul of the Commerce Commission for probable breaches of the Fair Trading Act for overcharging customers between 2003 and 2016.
No court action was taken but Tower agreed to recompense affected customers, pay $75,000 to a trust fund, and agreed to fix its IT systems.
Gatland said the company's paid back nearly $9.3m to about 58,000 of those affected.
"The FMA is seeking a declaration from the court that Tower contravened the FMC Act and that a pecuniary penalty is paid to the Crown."
Over the past few years the FMA has been cracking down on banks, insurers, and financial services firms for misleading and overcharging customers.
It has secured court rulings and relatively large penalties against leading brands including AA Insurance, Vero, Cigna, Westpac, and Kiwibank.