Insurance industry listed on Consumer NZ list of shame

by Maryvonne Gray 21 Dec 2015

Insurance industry listed on Consumer NZ list of shame

Consumer NZ has ranked the insurance industry in seventh place on its list of companies and industries who ‘need to try harder’ to measure up to consumer expectations.

Named after the organisation’s CEO, Sue Chetwin, ‘Sue’s List of Shame’ puts Harvey Norman in first place, followed by Jetstar, flushable wipes manufacturers, the soft drink industry, food labelling and the cosmetic industry before turning its attention to the insurance sector.

“A recent conference was themed being ‘consumer-centric’,” Chetwin said in her explanation.

“However, this is the industry which (sneakily we believe) achieved an exemption from new consumer laws that stop standard form contracts from containing unfair contract terms.”

Indeed, as a speaker at that conference, the Insurance Council of New Zealand (ICNZ) annual conference held last month, Chetwin raised the issue then too.

Her beef, she said then, was that the industry holds most of the cards.

“There is an asymmetry – you know a lot about what you’re insuring and the consumer knows a lot less.”

But ICNZ CEO Tim Grafton has hit back at the critique, calling it ‘disappointing’ and dismissing it as ‘mistaken’ and ‘misplaced’.

“It is disappointing Consumer NZ have chosen to highlight one consumer law, when all the rest of the consumer laws that protect consumers have no exemptions for insurance,” he said.

“Insurance does not have a wholesale exemption from the Unfair Contracts Terms Law. It has several specific exemptions for particular terms in insurance contracts.”

Grafton denied there was anything sneaky about the exemption that was provided, saying ICNZ made submissions to the Government like everybody else ‘and for very good reasons’.

“Consumer NZ makes the mistake of thinking of insurance in the same way as any other off-the-shelf consumer product and to have not had an exemption for some critical terms in insurance contracts could lead to a disaster for policyholders and New Zealand.

“For instance, if an insurer had no ability to modify a contract mid-term, then in the event of a catastrophe as happened in Canterbury and reinsurance was not available or very limited reinsurance was available, then insurers could face an insolvency crisis.

“This would detrimentally affect hundreds of thousands of consumers.”

Grafton said several other terms would have created significant uncertainty if caught.

“For instance, premiums are set reflecting the underlying risk, but inclusion of premiums being caught by the unfair provisions potentially limited insurers’ ability to do the very thing insurance contracts are there to do.”

He added that terms such as ‘good faith’ and ‘duty of disclosure’, which have meanings established over hundreds of years, were better covered under insurance law, not general product consumer law.

However, he said: “It is worth noting that insurers do fall under other aspects of consumer law and regulatory matters and insurance offers one of the longest cooling off periods of standard consumer contracts.”

He added:  “Consumer NZ’s criticism is misplaced.”

In March, when the law change came in, Insurance Business asked DLA Piper New Zealand partner Crossley Gates his view of the exemptions which he said he believed was a ‘healthy middle ground’.

He said he had recommended to some insurers that changes be made to rebalance some of the one-sidedness.

But he said the territory was still basically uncharted.

Read more here.
19 Comments
  • Michael J Sinclair 27/12/2015 11:20:59 a.m.
    From my experience through thr ChCh earthquake this is a correct summary of the Insurance Industry. This is an industry which has no morals, is dishonest and dishonourable and for the sake of Kiwis in future disasters must be regulated. It is not fit to self regulate as it has shown to many in Christchurch. The fact that the CEO was selected from the ranks of political spin doctors says all we need to know about this industry.REGULATE THE INSURANCE INDUSTRY.
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  • Paul King 28/12/2015 12:51:02 p.m.
    The insurance industry only has itself to blame. Insurance premiums are paid and then when the event happens they don't fulfil their part of the contract to payout. They then try and find every way they can to delay defend and or deny the claim.
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  • Tim 13/01/2016 2:54:22 p.m.
    I'm absolutely offended by the two commentators above (Michael & Paul) tarring the entire industry with the brush of their personal experience.

    As a broker I pride myself on having the highest standards for the care of my clients, including their claims. When they pay their premiums they know what they're getting, and understand that policies also have exclusions.

    To suggest I have no morals, am dishonest and dishonourable is disingenuous to say the least. It's ignorance of the industry that leads to these vague and spiteful comments.

    Assuming insurers delay, defend or deny every claim suggests that comment too is made from ignorance.

    My clients appreciate the service they get, and the claims they get paid out on. That's why they use us.

    What particular axes do these two have to grind, I wonder? I smell Southern Response in this. Perhaps you should have used a broker - insurance isn't a commodity. Yet.

    Clearly the industry needs better PR, but it's hard to dress up a grudge purchase, which is what insurance is to most people, for better or worse.
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