Next steps for insurance contract law review

Next steps for insurance contract law review | Insurance Business

Next steps for insurance contract law review

Insurance contracts need to be reformed so that all New Zealanders have the protection of a well-functioning insurance market, Commerce and Consumer Affairs Minister Kris Faafoi says.

Faafoi announced the terms of reference for a review this week. The next step will be the development and release of an issues paper for public consultation in mid-2018. This will provide an opportunity for public comment on the objectives for insurance contract law, and on the issues that have been identified.

The review will examine a range of issues within insurance contract law, including those that relate to: disclosure obligations for policyholders, technical issues that have been identified by the Law Commission and insurance industry, gaps in New Zealand’s regulation of insurers’ conduct, the scope of terms defined to be not ‘unfair contract terms’ under the Fair Trading Act and consumers’ ability to find and compare prices and policies.

At present, there are six Acts governing insurance contracts, two of which date back to 1908, and numerous issues have been raised with insurance legislation. The review promises to modernise New Zealand’s insurance contract law and consolidate it into one Act.

“The sector has been supportive of the need for a review, so I am optimistic that stakeholders will be involved in order to make good progress swiftly,” Faafoi said.

The review will consider whether there’s a case for greater regulation and supervision of insurers’ conduct. The International Monetary Fund identified that New Zealand’s insurance sector had room for improvement in both regulation and supervision.

Faafoi said insurance contract law had been significantly updated in comparable markets such as Australia and the UK, and added that the review was “long overdue”.

“I see this as an important piece of work so I am asking officials to move this forward quickly,” he said. “With Cabinet approval I hope to release an issues paper for public consultation in mid-2018. If I find that change is warranted, I’ll be working towards introducing legislation in the current Parliamentary term.

“Insurance plays an important role in the lives of New Zealanders, helping people cope with unforeseen life events and providing businesses with greater certainty.

“But there are significant problems with New Zealand’s insurance contract law which are undermining the effectiveness of our insurance markets and impacting those who do not receive the support they anticipated from their insurance policies.

“I have heard, for example, that consumers are sometimes not covered for losses or unable to claim for important needs like health treatment because they innocently did not disclose seemingly unrelated matters to the insurer.

“This is really tough for people who genuinely believe they have met their requirements and are later unable to rely on benefits of insurance. So, onerous disclosure requirements are one of the issues I am keen to look at.”

The review will be led by the Ministry of Business, Innovation and Employment (MBIE).

The proposed process for the review is:

  • Mid-2018: Release of an issues paper for consultation

  • Late 2018: Release of an options paper for consultation

  • Mid-2019: Policy decisions made; to be followed, if warranted, by a legislative process.



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