Dispute resolution scheme changes questioned

by Maryvonne Gray 06 Mar 2015

Dispute resolution scheme changes questioned

The Insurance Council of New Zealand (ICNZ) has highlighted its concerns about moves by the government to allow independent dispute resolution bodies more power in a bid to speed up unresolved Canterbury earthquake-related disputes.

Commerce and Consumer Affairs Minister Paul Goldsmith announced yesterday that public consultation had started on a proposal to raise the compensation cap from $200,000 to $350,000 for property insurance disputes.

This would mean the four existing schemes (the Banking Ombudsman, the Insurance & Savings Ombudsman, the Financial Dispute Resolution Scheme and Financial Services Complaints) would be able to consider cases where the insurer and customer were seeking to resolve a claim discrepancy of up to $350,000.

“Currently disputes over $200,000 must be referred to the High Court, which many people may not be able to afford,” Goldsmith said.

“Dispute resolution is an independent, less formal and cheaper alternative to the Court system.

“This proposed change would enable more effective and faster resolution of issues, and in particular should help move forward some of the unresolved disputes in Canterbury.”

Anyone with a dispute dating back to August 2010 would be able to take advantage of the change.

However, ICNZ CEO Tim Grafton said he had doubts on the proposal.

“The retrospective nature of the proposal is not one that accords with good law-making, so this will be an area where we will want to understand the implications well, as officials appear to have given this little thought in their discussion paper,” he told Insurance Business.

“We’ll be consulting with our members and providing input as part of the consultation process.”

Insurance lawyer Andrew Hooker said he didn’t think broadening the scope of the ISO and FSCL would solve the problem.

He said when more was at stake, people preferred to have their disputes resolved in court.

“The technical issues which are being decided in court are groundbreaking issues… Brand new legal issues have come out of the earthquakes,” he told interest.co.nz.

He questioned whether the ISO had the technical expertise to deal with the more complex cases and suggested the bottleneck could shift to the dispute resolution schemes instead of the courts.

Submissions on the proposal close on 9 April, with any resulting increase in the compensation cap being made in mid-2015.

Goldsmith said the upcoming review of the Financial Advisers Act and Financial Service Providers Act would provide the opportunity to consider the role of the dispute resolution schemes and their jurisdiction more broadly.
  • Jbone 6/03/2015 12:46:57 p.m.
    Completely agree, groundbreaking issues have come from the earthquakes.
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  • Tim Grafton CE ICNZ 6/03/2015 12:49:11 p.m.
    Andrew Hooker's point is well made. Legal clarification in the Courts can affect how policies respond to multiple claims. Where there is a need for clarification like this, it is preferable for the Courts to make a call than have the matter referred to the binding decision of a disputes resolution service. Having said that, the DRS perform a useful means for resolving disputes in many cases. What is not clear from the MBIE proposal is what the implications are - does retrospectivity allow people to return to have another go? If not, were those who did not avail themselves of using DRS because of the $200,000 cap unfairly treated? MBIE shows no sign of having considered these issues in its discussion paper. Indeed, it shows no data to show that there is a significant problem that calls for this approach. It would help all concerned to have had some analysis done.
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