FMA Letter to Insurers outlining expectations regarding Contracts of Insurance Act

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The Contracts of Insurance Act (CoIA) represents a significant reform of New Zealand’s insurance contract law. The Act, which comes into effect on 15 November 2027, modernises the legislative framework governing insurance contracts and is intended to ensure insurance markets operate fairly and transparently, supporting consumer confidence and trust.

The core purpose of CoIA is to rebalance the relationship between insurers and policyholders by improving the fairness of contract terms and insurer practices while enabling individuals and businesses to manage risk effectively. CoIA is distinct from, but complementary to, other conduct and market regulation. It focuses primarily on the fairness of contract terms and on the conduct of insurers in their direct dealings with individual policyholders, including how underwriting questions are asked, how disclosure is assessed, and how remedies are applied.

CoIA reforms disclosure obligations for policyholders by moving away from broad and often ambiguous disclosure requirements. Instead, consumers are required to take reasonable care not to make a misrepresentation. This approach is intended to provide greater clarity for consumers and to ensure expectations are clearer and more practical.

CoIA also introduces proportionate remedies. Insurer responses to non‑disclosure or misrepresentation must be fair and appropriately aligned with the nature and impact of the breach. These reforms are intended to reduce outcomes that may be perceived as technical or harsh, while supporting a balanced approach between insurer and policyholder interests.

Our expectations

While the Act does not come into force until November 2027, we expect insurers to be actively preparing now. This includes undertaking gap and impact assessments, understanding how existing practices align with CoIA requirements, identifying areas where changes or redesign will be required and embedding CoIA considerations into governance, risk management, and assurance frameworks. Early preparation is crucial in managing delivery risk and supporting effective implementation.

We acknowledge that some insurers are awaiting final regulations. However, we do not consider it appropriate to delay implementation planning until regulations are finalised. The regulations represent a small component of the reforms and consultation undertaken to date provides a sufficient basis for insurers to progress extensive implementation work. Delaying preparation increases the risk of compressed timeframes, incomplete implementation, and avoidable compliance and conduct risks.

The FMA expects insurers to demonstrate clear ownership of CoIA implementation, proactive planning, and tangible progress well in advance of commencement. We will be looking for evidence that CoIA requirements are being embedded into business practices in a way that delivers fair outcomes for policyholders and aligns with the intent of the reforms.

We also expect that CoIA requirements be fully understood and effectively operationalised across relevant business practices including product design, sales, underwriting, policy administration, and claims handling. Insurers should ensure that CoIA implementation is not approached in isolation and should align with broader fair conduct obligations so that consumers are treated fairly throughout the insurance lifecycle.

The FMA has monitoring and enforcement responsibilities in relation to CoIA. From commencement, we will use our supervisory and enforcement tools under the Financial Markets Conduct Act to assess and influence compliance with CoIA obligations. We expect insurers to treat CoIA as a substantive regulatory reform that requires clear accountability, appropriate resourcing, and dedicated focus and oversight. In our view, approaching CoIA implementation as a narrow legal or technical exercise increases the risk of poor implementation outcomes and inconsistent treatment of policyholders.

Insurers that take a considered, timely, and well‑governed approach to implementation will be better positioned to meet both regulatory and consumer expectations when CoIA comes into force.

Insurers should also take a proactive approach to communicating changes to consumers. This includes considering whether additional or early communication is needed to ensure consumers are aware of, and can reasonably understand, changes to their obligations and, where relevant, their cover. Communication should be timely, clear, concise, and effective, particularly where changes may impact consumer understanding or outcomes. Consumers should be given a reasonable opportunity to engage with their insurer and understand those changes.

Industry engagement and support

The FMA is committed to supporting and engaging constructively with industry as CoIA implementation progresses, including through engagement with industry associations. Our discussions with insurers to date have been valuable in understanding readiness, challenges, and areas where guidance or clarification may be most helpful. We encourage insurers to continue engaging openly with us, as their programmes progress and to raise issues early where uncertainty or practical challenges arise.

We appreciate your continued engagement and cooperation as we work together to support effective implementation of these important reforms. If you have any questions or would like to discuss your CoIA programme, please contact me or Michael Hewes (Director, Deposit Taking, Insurance & Advice).

Yours sincerely

Clare Bolingford 
Executive Director – Licensing and Conduct Supervision