The government is demonstrating a strong focus on consumer protection by including conduct and regulatory issues into its insurance contract law review, according to law firm MinterEllisonRuddWatts.
Insurance contract law is currently being reviewed by MBIE with input from the FMA, the Commerce Commission and Reserve Bank of New Zealand. It is primarily focused on issues around duty of disclosure, unfair contract terms and various technical issues that may be addressed in future law reform – however, recent market shifts have also placed conduct issues on to the list as a key priority.
“From my perspective, the most interesting aspect of the proposed reform is that, although billed as an insurance contracts law review, it encompasses conduct and regulatory supervision as well,” said chair and partner Lloyd Kavanagh.
“To date, the insurance sector has been largely self-regulated. MBIE refers to a raft of consumer issues including claims handling complaints, issues with sales and advice and product suitability, all of which are examples of issues that might indicate gaps in regulatory oversight. However, no one regulator currently has oversight over insurers’ and intermediaries’ conduct during the full lifecycle of a policy.”
MBIE has identified this regulatory gap in its issues paper, citing Core Principle 19 – a framework stating that insurers and intermediaries must treat customers fairly throughout the insurance process. The sector has been asked to comment on whether the gap between current regulation and Core Principle 19 is of significant concern.
Kavanagh notes that while some insurers may not agree with all the issues raised by MBIE, it is vital that they engage with the review process to ensure that any changes made do not negatively impact their business, while also bringing insurance sector regulation up to the standards applied to other financial services firms.
“If the objectives of the review are met, customers will have greater certainty with regard to the response of their policy in the event of loss, though it will be challenging to achieve this without impacting on an insurer’s ability to effectively measure and price risk,” he stated.
“It is critical that the industry engages with this law review constructively to ensure that the policy decisions leading to legislative change are fair and commercially effective.”