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.
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