Insurance & Financial Services Ombudsman Karen Stevens has expressed optimism about impending changes to New Zealand’s insurance legislation, which aims to simplify and clarify contracts for consumers.
The new Contracts of Insurance Bill will introduce measures to ensure fairness in the industry, particularly around non-disclosure and the language used in policies.
Stevens leads the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme), which since its establishment in 1995 has dealt with over 80,000 cases, predominantly involving insurance complaints.
Stevens said modernising insurance laws has been long overdue, with recommendations first made in 1998 by the Law Commission shortly after she took her current role.
“I’m pleased that it’s finally on the table, as it’s been 26 years of waiting for the law to be changed. New Zealand is way behind Australia and the UK in this area, so these changes are really overdue,” she said.
The bill, which was also welcomed by the Insurance Council of New Zealand (ICNZ), specifically addresses consumer non-disclosure, a frequent issue the IFSO Scheme encounters.
“We see claims declined due to innocent mistakes. Many consumers don’t understand what information they are supposed to tell their insurer, and the consequences if they don’t disclose this information,” Stevens said. “Forgetting to tell the insurer something regarded as being material to the risk of providing a consumer with insurance (i.e., whether the insurer would have provided cover or not, and on what terms) can be fatal.”
The bill will compel insurers to ask clearer questions, helping consumers accurately provide the required information. However, deliberately misrepresenting details to secure a payout will still give insurers grounds to void the policy and deny the claim.
A proportional response to non-disclosure will also be introduced, replacing outright policy cancellations. This means insurers could modify premiums or implement specific exclusions instead of rejecting claims altogether.
Another feature of the legislation will be an emphasis on simple language in policy documents, improving transparency for consumers. However, Stevens cautioned that consumers must carefully read their policies to understand what is and isn't covered.
“Consumers still need to read the policy to know what cover it provides. There is cover and there are exclusions,” she said.
She added: “We are looking forward to consumers having a fairer set of laws when it comes to insurance, and we hope this bill gets passed swiftly. Having Minister Bayly introduce this bill with the intention of passing it into law by the end of the year is great news for consumers and fully supported by the IFSO Scheme.”
