Youi will pay $164,000 after the corporate watchdog raised concerns the insurer had been charging people for policies they hadn't agreed to buy.
The company will refund approximately $14,000 to 102 consumers and pay $150,000 to an advocacy group for people in financial stress.
The Australian Securities and Investments Commission on Wednesday said Youi's remuneration and bonus structures had encouraged staff to prioritise sales over consumer interests.
ASIC said it was concerned that some people had been charged for policies after asking for a quote.
Acting ASIC chair Peter Kell said insurers should be focused on customers' best interests.
"It is completely unacceptable that customers were signed up for Youi insurance policies without their knowledge or permission," Mr Kell said.
As a result, Youi has reduced sales-related incentives, reviewed its training, and improved monitoring of staff.
Auditor EY has reviewed Youi and will conduct a follow-up review that will be sent to ASIC by June 30.
Youi chief executive officer Frank Costigan apologised for the misstep.
"We have worked closely with ASIC and independent expert EY to complete comprehensive reviews of our systems and processes and have made changes to try to ensure the historical issues won't happen again," Mr Costigan said.
In December, Youi was fined $320,000 in New Zealand for misleading sales techniques, after agreeing to plead guilty to 15 charges in the Auckland District Court.
It had already been fined $100,000 by the Insurance Council of New Zealand for making misleading statements to customers, and debiting bank accounts without permission.
