Shake-up for insurance
Looming changes to insurance laws should give consumers more certainty about whether their claims will be paid, Commerce Minister Kris Faafoi says.
The Government has been running a review of New Zealand’s insurance contract law.
But he said the current rules were outdated and many insurance policies were complex and difficult to follow.
‘‘This means consumers can be buying insurance products they don’t understand, which can be poorly suited to their needs, and can leave them in the dark about what they should disclose to their insurer.
‘‘Following extensive public feedback, we are improving the rules around what policyholders must disclose to insurers, making changes to allow people to more easily understand their policy, and we’re addressing unfair contract terms,’’ Faafoi said.
Changes the Government has agreed on include placing the responsibility on insurers to ask consumers the right questions when processing new policies.
It is currently up to applicants to disclose the right information to give insurers all the material details necessary. There have been concerns that many did not fully understand what information insurers might think relevant.
Insurers will have to respond ‘‘proportionately’’ when consumers don’t disclose something they should have, or misrepresent themselves.
As it stands, people can have their claim declined over nondisclosure, or the policy ‘‘avoided’’, meaning the insurer acts as if it never existed. That can affect their ability to get cover again.
The Insurance Council of New Zealand’s members – most of the country’s general insurers – has already instituted a Fair Insurance Code that requires insurers act ‘‘reasonably’’ when faced with nondisclosure, but this is voluntary.
Insurers will also be required to write policies clearly so that they can be understood by consumers.
There will also be stronger protections for consumers against unfair terms in insurance contracts.
The Financial Markets Authority will have more powers to monitor and enforce compliance with the new requirements.
Insurance Council chief executive Tim Grafton welcomed the changes. He said the existing legislation was outdated.
‘‘This is a highly technical area and we support the minister’s decision to consult on a draft piece of legislation, a process that we will engage in constructively.’’