The Financial Markets Authority (FMA) is considering regulatory action against three major financial institutions as a result of its review of insurance replacement business practices.
The thematic review took a close look at how insurance businesses identify and manage the inherent risks involved in selling replacement insurance policies, a transaction which, according to the FMA, heightens the risk of claims being declined and original policy benefits being lost. The regulator is specifically concerned that replacement policies benefit those making the sale rather than the customer, even when the impact on the policyholder is ‘neutral.’
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