Focus on insurance industry

Consumer Affairs Minister Kris Faafoi wants people to tell him about their concerns with the insurance industry, as pressure builds on the sector over conflicts of interest around incentives, harsh disclosure provisions, and unfair exemption clauses.

A well-functioning, fair insurance system was essential, but New Zealand’s regulations were outdated, with legislation spanning six different acts, some of them more than 100 years old, Faafoi said.

“There are significant problems with New Zealand’s insurance contract law, which are undermining the effectiveness of our insurance markets. 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 insurers,” Faafoi said.

Announcing the start of public consultation on New Zealand’s contract law, the minister highlighted several worrying practices, including:

Insurers refusing claims under a policy if the consumer does not share a material fact, even if the undisclosed fact is unrelated to the claims made, the non-disclosure did not cause any loss to the insurer and the nondisclosure was innocent.

The fact there was no single regulatory body dealing with the full policy lifecycle.

Remuneration practices, in terms of financial commissions and other perks. that may be incentivising behaviours that negatively impact consumer.

Excessive pressure on potential customers from people selling insurance.

Unfair contract terms, particularly exclusions and exceptions.