Government to make insurance contracts fairer and easier to understand

Government to make insurance contracts fairer and easier to understand | Insurance Business

Government to make insurance contracts fairer and easier to understand

Some insurance complaints can be a result of consumers not being well informed about their policies or the contract they signed up to – and the government wants to solve that problem by making insurance contracts fairer and easier to understand.

The proposed government changes aim to: improve the rules around what policyholders must disclose to insurers, help people to more easily understand their policy, and address unfair contract terms.

“Insurance is vitally important in supporting consumers and businesses to be financially resilient when unexpected events happen,” Minister of Commerce and Consumer Affairs Kris Faafoi said.

“The current law is outdated, and many insurance policies are complex and difficult to follow. This means consumers can be buying insurance products they don’t understand, which can be poorly suited to their needs, and can leave them in the dark about what they should disclose to their insurer.”

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The proposed changes include placing the responsibility on insurers to ask consumers the right questions when processing new policies, requiring policies to be written and presented clearly, ensuring insurers respond proportionately when consumers don’t disclose information they should have, strengthening protection for consumers against unfair terms, and extending powers to the Financial Markets Authority (FMA) to monitor and enforce compliance with new requirements.

“All New Zealanders deserve the assurance that when they claim for losses, their policy will provide the cover they expected. However, longstanding issues with insurance contract law have been undermining the benefits of being insured,” Faafoi said. “These measures will complement decisions the Government made earlier this year requiring insurers and other financial service providers to treat their customers fairly.

“We want to be sure we’ve landed on solutions that will work in practice, so we expect to consult with the public next year on draft legislation before any changes come into effect.”