Life insurers criticised for taking too long to tackle issues
WELLINGTON: Life insurance firms have been criticised by regulators for being too slow to improve their culture and conduct, which appears set to lead to tougher regulation.
The Reserve Bank (RBNZ) and Financial Markets Authority (FMA) reviewed 16 companies and found they generally put profit before customers’ interests.
After the review the companies were asked to show how they intended to improve their systems and behaviour and tackle issues such as sales incentives.
FMA chief executive Rob Everett said many of the companies had done little work and some did not even respond.
‘‘It is clear that progress has been slow and not as farreaching as required. Some providers have started work to identify the customer and conduct issues they face. Others have not provided any detail on this.’’
Those that did respond identified 75,000 issues that needed fixing, including overcharging of premiums, underpaying of benefits and unfairly declined claims.
Not all of the companies had removed sales incentives for frontline staff, as requested by the regulators.
The FMA and RBNZ said the life insurance industry’s weak appetite for change proved it needed tougher regulation.
‘‘Deficiencies in some of the plans received, and some insurers’ lack of commitment to implementing the regulators’ recommendations, further demonstrates the need for additional obligations to be included in the regulation of conduct of life insurers,’’ Mr Everett said.
At present regulators cannot force insurers to comply with their recommendations.
The Financial Services Council, which represents the industry, accepted companies needed to do better.
‘‘It is clear that as a sector we need to do more and do it faster to improve identified issues, especially in relation to legacy products, customer communications, and product design,’’ council chief executive Richard Klipin said.
‘‘Conduct, culture and ensuring great consumer outcomes is paramount. Improvements across the sector remain a work in progress and this latest review from the FMA and RBNZ demonstrates that.
‘‘Individual members will now work through their specific issues raised by the FMA and respond appropriately with steps to rectify them.’’ — RNZ