FMA issues damning report on insurers

WELLINGTON: The insurance industry is generally illprepared and, in some cases, ignorant of or indifferent to improving its conduct and treatment of customers, according to the Financial Markets Authority (FMA).

The authority has issued a damning report after asking 42 companies to detail what processes and systems they have in place to ensure consumers are charged correctly and have the right types of policies and codes of conduct for staff.

FMA director of banking and insurance Clare Bolingford said some firms did not seem to be taking the issue seriously.

‘‘Prior to our inquiries, many firms claimed they were confident no significant issues existed. But this review has revealed a number of instances of poor conduct.’’

The report said some insurers demonstrated that they ‘‘did not see conduct and culture as relevant to their organisation’’.

The survey covered companies providing house, contents, vehicle, commercial, liability, travel and health insurance.

Only two of the companies — IAG and the Medical Assurance Society — satisfied the FMA queries. Ten were seen as deficient in some regard, and 30 described as inadequate. Among the firms failing to meet the FMA’s expectations were leading brands AA, AIG, FMG, nib, Southern Cross, Tower and Vero.

The review showed many insurers did not actively monitor product suitability, were still selling poorvalue products and had overcharged some customers.

Ms Bolingford said insurers needed to improve their systems supervising what brokers were doing on their behalf, improve staff culture and have systems for fixing problems.

The behaviour of banks, fund managers and finance businesses have been under scrutiny by the FMA and the Reserve Bank in recent years.

The life insurance industry was harshly criticised by the regulators in 2019 for putting profits before people.

Ms Bolingford said updated laws with a licensing regime were before Parliament at present, and they would require insurance firms to be licensed and meet standards.

‘‘It is now time for the industry to take meaningful steps to improve or risk facing regulatory action,’’ she said, adding that firms might be denied a licence if they did not comply. — RNZ