There are significant problems in the New Zealand insurance market, including a high level of complaints and low levels of trust, says one consumer group.
According to Consumer NZ, consumers are paying more than ever for insurance but they are not getting a fair deal. The consumer group’s latest industry report found only 13% of consumers were confident they could trust insurers to give them good advice. Many were unsure about the cover provided by their insurance policy and what they were getting for their money and only 18% felt they fully understood the terms of their policies.
The survey also revealed that those who bought cover through an insurance adviser or broker were more likely to feel they were getting a bad deal. It suggests they were significantly less likely to be satisfied with the service they got compared with those who bought direct from an insurance company.
Consumer NZ chief executive Sue Chetwin said this difference was most evident among consumers who had bought life insurance. Only 28% of those who purchased life insurance from a broker were happy with the service provided, compared with 44% who bought direct from an insurance company.
“Life insurance brokers get paid on commission, which can be as high as 200% of the premium, Chetwin explained. “Commission-based selling comes with a huge risk the broker will put their earnings ahead of what’s right for their customer.
“The results of our research suggest selling insurance this way is leading to poorer outcomes for consumers,” she added.
Meanwhile, when it comes to insurers, one in four customers said they experienced a problem with their provider, with having a claim unreasonably declined as the top complaint.
Chetwin said insurers had wide-ranging rights to decline a claim if they decided a customer hadn’t told them something they considered material, regardless of whether the customer knew they needed to disclose this information.
“In other countries, consumer protection laws prevent insurers from unreasonably refusing a claim in cases of innocent or accidental non-disclosure,” she explained. “But that’s yet to happen here, which means Kiwis are more likely to have claims declined.”