Insurance renewal risk identified by FMA
WELLINGTON: Thousands of consumers may be millions of dollars out of pocket because insurance companies have improperly put their commercial interests ahead of clients.
‘‘We are concerned that a number of firms are not recognising or treating the risks to customers in replacement insurance transactions,’’ Financial Markets Authority director of regulation Liam Mason said yesterday.
‘‘Processes seem to be set up to manage the risks faced by the firms, not to help customers.’’
The main problem identified in the recent FMA report is when consumers renew or change their life and health insurance policies, and whether companies were advising clients about higher costs, increased risks, or reduced benefits and coverage.
‘‘It is disappointing that despite the risks to consumers, some insurance providers do not identify insurance replacement as a particular area of risk.
‘‘We are now considering regulatory action where our findings suggest a firm is not meeting its legal obligations,’’ he said.
Six of the companies surveyed had some measures in place to reduce the risks to clients, but only two had what the FMA called high quality procedures aimed at helping consumers.
Parliament is considering law changes to require better practices and standards of financial advisers, which Mr Mason said would answer many of the concerns raised by the report.
He said consumers also needed to be more aware and ask questions of sales people and advisers when changing life insurance arrangements.
‘‘We don’t shy away from the fact that the findings of the review are mixed and that there is a clear challenge from the FMA for the industry to improve practices related to replacement insurance transactions,’’ the Financial Services Council’s chief executive, Richard Klipin, said.
One of the biggest life insurance providers, AMP, said it was confident it was offering a good service to customers.
‘‘We’ve made sure we’re not participating in what I regard in some cases as a bit of a merryroundgo of replacement business in the industry,’’ New Zealand managing director Blair Vernon said.
❛ It is disappointing that despite the risks to consumers, some insurance providers do not identify insurance replacement as a particular
area of risk