Insurers to rule on what makes a SME

The previous code didn’t take into account catastrophe situations and didn’t set out any timeframes for responding to claimants or keeping them informed of the progress of their claims.

Insurers are set to decide which businesses will benefit from new, improved protections for people buying insurance when they define what counts as a small or medium-sized business.

The Fair Insurance Code 2015 will impose claim processing time limits and other consumer-friendly obligations on insurers, such as a requirement to be more reasonable when a customer accidentally fails to tell them something important.

Insurers will be bound by the code when they are dealing with people and small and medium companies, however dealings between insurers and big businesses are not covered.

The Insurance Council would decide how to define a SME when it meets at its annual general meeting in March, the council’s chief executive Tim Grafton said. One possibility is to adopt the Ministry of Business, Innovation and Employment definition, which defines a SME as any business with fewer than 20 staff. Another option is to base the defi- nition on turnover.

Grafton said the 28 insurers bound by the code would adhere to time limits for responding to claims and requesting more information.

Insurers will determine whether or not to accept a claim within 10 business days of getting all the information they need, or explain why they need more time.

Insurers will also agree to act reasonably when a customer accidentally fails to tell them something that alters the risk, and to ask proper questions to help people disclose everything.

Legally insurers can sometimes cancel policies and avoid paying out if it turns out they were not told of something that could have affected the risk, even if the insurer never asked about it.

Grafton said the code would try to im- prove communication and commit insurers to being reasonable when something went wrong. For example, the insured person might be given the option of paying a higher premium and still being paid for their claim, rather than walking away empty-handed.

The new code also includes directions for dealing with major catastrophes, following gaps exposed by the Canterbury earthquakes.

‘‘The previous code didn’t take into account catastrophe situations and didn’t set out any timeframes for responding to claimants or keeping them informed of the progress of their claims,’’ says the Insurance Council. ‘‘A requirement to prioritise the vulnerable has also been included as a mandatory requirement for insurers.’’

The new code takes effect next year.