Industry body points to major omission in COFI Bill

Industry body points to major omission in COFI Bill | Insurance Business New Zealand

Industry body points to major omission in COFI Bill

The Financial Markets (Conduct of Institutions) Amendment Bill is currently in its second reading, but one industry body has expressed concern that it has left a significant gap in its coverage of the insurance sector.

The Insurance Brokers Association of New Zealand (IBANZ) noted that the COFI Bill does not currently cover The Earthquake Commission (EQC) - something CEO Mel Gorham said is “unsettling” given the amount of cover it provides for homes affected by natural disasters.

“Whilst COFI captures insurer conduct, it does not capture the conduct of the EQC,” Gorham said.

“While not technically considered an insurer or financial institution, there is no getting away from the fact that EQC currently provides the first $150,000 cap of natural disaster cover for every home in New Zealand.”

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“This is regardless of whether these are standalone or terraced houses, units or apartments, which may be in buildings dedicated to private residences, or in mixed use buildings which also contain shops, offices, etc.,” she explained.

“In many instances, residences within retirement villages are also covered by the EQC cap, as are parts of other commercial buildings used as private residences such as in hotels, motels and pubs.

“Not including the EQC within the COFI bill is a concerning omission, particularly when bearing in mind the issues faced (and still being faced) from the natural disasters in New Zealand over the last decade.”

Gorham acknowledged that while private insurers will largely handle the claims process in the event of a natural disaster, the non-inclusion of EQC in the COFI Bill will still lead to uncertainty, and may “restrict product choice” as the partnership agreement does not cover every insurer in New Zealand.

“The regulations consultation paper released by MBIE points to agreements between EQC and some insurers whereby those insurers will handle claims on behalf of the EQC,” she said.

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“This is not an adequate solution in our view as the agreements are for a period of time, and are only with some insurers which act in an agency type capacity (not as insurers) in respect of the EQC cap.”

“We believe the points we have raised will lead to uncertainty, impact the availability of independent financial advice and restrict product choice,” she concluded. “Consequences which will worsen, rather than improve, outcomes for those COFI seeks to protect.

“We appreciate being involved throughout the consultation process, and are hopeful that the continuing issues we have identified with the bill will be addressed.”