Insurance companies and intermediaries face significant operational changes following the passage of the Contracts of Insurance Act, according to an analysis published by law firm MinterEllisonRuddWatts.
The legislation, which received Royal Assent last year, will modernise New Zealand's insurance framework by November 2027.
The act introduces a distinction between consumer and non-consumer insurance contracts, based on the purpose of the insurance policy rather than the policyholder's identity.
A consumer contract is one "ordinarily entered into by a policyholder wholly or predominantly for personal, domestic or household purposes."
The legislation fundamentally changes consumer disclosure obligations. Consumers will only need to "take reasonable care not to make a misrepresentation," shifting the burden to insurers, who must now ask specific questions rather than rely on generic information requests.
For non-consumer contracts, policyholders must make a "fair presentation of the risk," including information known to senior management and insurance brokers.
The act also introduces proportionate remedies for non-disclosure, moving away from the current "all or nothing" approach.
Sharing their insights on the possible implications of such legislation in the fulfillment of obligations and contracts, law firm MinterEllison stated that in the short term, it expects the primary industry focus to be on ensuring compliance and implementing necessary changes to products, policy wordings and processes.
“In doing so, insurers and insurance intermediaries will need to address tricky issues such as the application of the definitions of consumer and non-consumer insurance contracts to those policies that do not neatly fit within either,” the law firm said, including nuances in information requests in consumer insurance proposal forms to avoid arguments over breach of the duty of disclosure.
The firm anticipates potential premium impacts as the industry adapts to these consumer-focused changes.
The legislation also abolishes the third-party statutory charge, replacing it with direct rights against insurers for specific policyholders, primarily those who are insolvent or deceased.
Companies have until November 2027 to implement these changes, with transitional provisions applying to many new obligations. The firm advised early preparation, particularly in staff training, process updates, and IT system modifications.
How will the new act impact insurance premium calculations and disclosure requirements? Let us know your thoughts in the comments.
