New measures aimed at safeguarding consumers’ dealings with insurance companies and banks have been released today, and are set to be introduced to Parliament this year.
Commerce and Consumer Affairs Minister Kris Faafoi detailed the proposed measures including a ban on target-based remuneration and incentives; imposing new legal duties on banks and insurers; and ensuring insurance and bank products sold to consumers are fit-for-purpose and sold to the right people. To ensure improved handling of insurance claims, the government proposes requiring insurers to settle claims within a set time, with exceptions for certain circumstances.
Faafoi said new enforcement tools would also be created so that when these rules are not met, providers will face appropriate consequences. The government wants to provide new regulatory tools such as public warning, stop orders and court injunctions. Also among its initial preferences are strong civil pecuniary penalties to deter misconduct, and applying executive accountability to senior managers and directors.
“Everyone should be able to rely on their banks and insurers,” he said. “Unfortunately while some have put consumer interests first, the recent reports by the FMA and RBNZ showed that there are major issues in the life insurance sector and poor conduct and culture in the banking sector that needed to be addressed.”
The minister said the financial sector reforms come as part of a broader programme underway to improve the regulation of New Zealand’s financial system. This includes the Financial Services Legislation Amendment, changes to the Credit Contracts and Consumer Finance Act, and a review of insurance contract law. He noted the government is also considering making the unfair contract terms protections outlined in the Fair Trading Act apply to insurance, which he said will give consumers additional safeguards.
Consultations on the conduct of financial institutions options paper close on June 07.