New financial conduct bill lists requirements for consumer protection

New financial conduct bill lists requirements for consumer protection | Insurance Business

New financial conduct bill lists requirements for consumer protection

The government has announced that the new financial conduct legislation, which passed its first reading this week, includes precise requirements to ensure that customers will be treated fairly by financial institutions.

Last year, the government announced plans to ban target-based incentives and to introduce a new conduct licensing system for banks, insurers, and nonbank deposit takers.

Commerce and Consumer Affairs Minister Kris Faafoi said the review by the Reserve Bank of New Zealand (RBNZ) and the Financial Markets Authority (FMA) revealed that target-based sales incentives could lead to behaviour that puts profit ahead of customers.

“The Financial Markets (Conduct of Institutions) Amendment Bill delivers on a number of changes to require banks, insurers, and other financial service providers to have the right systems in place for ensuring they treat their customers fairly,” Faafoi said.

“These measures will be implemented through obligations for licensed entities to have in place and comply with programmes outlining the standards of fair conduct their business operations will need to meet. The conduct programmes will also apply down the chain to intermediaries that licensed entities use to distribute their products and services.”

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The FMA is expected to have a wide range of tools to support the bill in requiring financial institutions to make changes to their business.

“Since the conduct and culture reviews, the government has moved swiftly to see that the industry addresses conduct and culture issues,” Faafoi said. “The government also recently announced changes to make insurance contracts fairer and more transparent for consumers. These changes will complement the new conduct regime by ensuring customers understand their policies and are treated fairly in all their dealings with insurers.”