22 July 2021

New Zealand insurers – you’ve got a lot of work to do

By Clare Bolingford
FMA Director of Banking and Insurance 

Fire and general insurers have a lot of work in front of them to get ready for a new conduct licensing regime that will require them to treat customers fairly.

The FMA has just completed a review of New Zealand’s fire and general insurers, where we’ve asked them to look over their businesses to check they’ve got the systems and controls in place needed to ensure good conduct and fair treatment of customers. Read the General Insurer Conduct and Culture report.

See a 2 minute video interview with Clare Bolingford with her assessment of the report and the industry's response:

It follows on from the Australian Royal Commission and the Bank Conduct and Culture Review, both in 2018, and the Life Insurer Conduct and Culture review which we published in 2019.

The results of our review are concerning — in general, industry responses fell well short of our expectations and the majority didn’t complete their reviews to an appropriate standard.

It really shows that New Zealand insurers have a lot of work to do to get ready for the new environment where we expect the FMA will soon be monitoring and supervising conduct and, in particular, fair treatment of customers. 

What’s really unfortunate is that not so long ago, before these reviews, most insurers told us they didn’t have problems but when they examined their businesses, they found them.

Our review has revealed a number of instances of poor conduct, and I strongly suspect many of these wouldn’t have been identified without the insurers first being asked by us to take a close look at their products and policies.

This latest review was the ideal opportunity for industry players to show how ready they are for the new conduct licensing regime being ushered in with the Financial Markets (Conduct of Institutions) Amendment Bill that’s currently making its way through Parliament.

While current laws do not provide specific conduct requirements for insurers, the FMA does expect them all to show good conduct in their dealings with customers and we’ve clearly communicated these expectations over the past few years.

The majority of insurers did not complete their reviews to the appropriate standard, with 95% of responses considered inadequate or deficient.

With their substandard response to FMA’s request, many insurers have revealed a worrying lack of commitment to ensuring good customer outcomes. While the new legislation isn’t yet in place, core conduct standards should still apply across the financial sector and the FMA has made this point repeatedly.

Insurers pride themselves on protecting the livelihoods and assets of New Zealanders, and say they’ll be there for customers when it matters. Good conduct is about living up to these commitments and doing what is promised. Poor conduct leads to customers being treated unfairly, and our review uncovered some real harms. 

Examples included things like:

  • People not getting the multi-policy discounts they’d been promised.
  • Customers being double charged premiums.
  • Poor IT systems leading to significant overcharging.

There’s no simple or quick answer to the problems our review has uncovered, but any solution has to start with New Zealand’s fire and general insurers first accepting that a focus on conduct and culture is an essential part of fulfilling their purpose.

Insurers must also ensure that products and services are clearly understood by their customers and are suited to their needs.

Our latest review shows this is all going to be a big challenge for many in the industry, but with a new regime on its way it’s imperative New Zealand’s insurers start taking their obligations seriously — and get down to work.