Summer breaks recharge the soul, which is just as well because 2019 promises to be a demanding year. Let me share some of what’s in store.
Hanging over from last year and expected very soon is the conduct and culture review of the Life Insurance sector by the Reserve Bank and the Financial Markets Authority. The signals are clear – the findings will be less positive than those for the banking sector that were released last November.
General insurers should read the tea leaves carefully. It won’t be enough to say those issues are not ours. Be prepared for greater scrutiny from regulators looking to see evidence that boards and management have sufficient oversight of culture to ensure that no conduct issues will arise.
It is noteworthy that this review and the imminent release of the Australian Royal Commission into misconduct into the banking, superannuation and financial services industry will precede the next stage of the Insurance Contracts Law review here. While insurance law is certainly in need of review, it will inevitably be used as a vehicle to tidy up conduct where appropriate.
It is timely, therefore, that the Insurance Council’s revised Fair Insurance Code, which sets high standards of service above legal minima for all dealings with customers, will be implemented later in 2019. Greater prominence will be given to the Code through a requirement for ICNZ members to apply a Fair Insurance Code logo to their products. This will go some way toward demonstrating in a public way our commitment to good conduct.
The ICLR will result in a change to the law on non-disclosure, a move ICNZ foreshadowed over three years ago with the then changes to the Fair Insurance Code that required members to respond reasonably to non-disclosure.
The Reserve Bank itself comes under scrutiny as submissions closed in late January on Phase Two of the Reserve Bank Act review. Although this raises fundamental questions about who the Bank should regulate, whatever the outcome regulators must be required to provide evidence-based decision-making and to work more collaboratively with the regulated sectors, especially around emerging risks, and be supportive of innovation and competition.
Dame Silvia Cartwright’s Public Inquiry into EQC will begin in earnest in February and she will have the independence and powers of a Royal Commission. The terms of reference include not just the Canterbury and Kaikōura earthquakes but other events like the Edgecumbe flooding and the Seddon and Eketāhuna earthquakes.
We support a focus on lessons learned with a fundamentally customer-centric direction for the future that removes the duplication and complexity that characterised some past claims handling.
Some changes to EQC come into effect much sooner. Data sharing with insurers and the ability to make EQC claims up to two years after an event take effect immediately when the Bill is passed in the coming weeks. Separately, insurers will need to communicate to their customers about the implications of EQC’s residential liability being raised to $150,000 from July 01, and the removal of EQC’s contents cover.
Efforts to defer the implementation of the Fire and Emergency New Zealand levy regime continue so a simpler, less costly approach can be adopted. This would provide an opportunity for a review of how best to fund FENZ and to consider options other than insurance.
While that covers some of the main items on the regulatory agenda for 2019, other initiatives will look to address risk and resilience, extend the reach of our financial capability programme and to prepare the ground for greater awareness of fraud.