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Chief Executive's report

The Insurance Council's programme of work has centred on the delivery of the Strategic Plan and Blueprints laid down by the Board.

The key objectives for 2007/2008 which had significant emphasis included:

• government regulation of insurance and assisting in the development of a sustainable regulatory environment;
• encouraging more sustainable communities by reducing under-insurance and non-insurance levels;
• working with local government and communities, and also central government, to develop our ability to prepare for, cope with, and recover from, the impact of events arising from climate change;
• the removal of the Fire Service levies from insurance policies, and the implementation of a fairer and more equitable system of collection;
• ongoing encouragement for increased policing and reduction of burglary and theft claims through a debate on law and order;
• addressing issues relating to fraud in the insurance industry; and
• generating a greater understanding of the critical role played by the insurance industry in underpinning New Zealand's society and economy.

While we were not able to complete all of these objectives, we continue to progress solutions and improvements.

The most significant area of work for the Insurance Council was related to government regulation. The Review of Financial Products and Providers, which was put forward as a concept in 2006, came to fruition. The Insurance Council has worked closely with our industry colleagues and created a Regulatory Committee to assess the legislative changes. One of the most pleasing outcomes is that the Insurance Council appears to have been successful in influencing a regulatory environment which is effective in addressing prudential and consumer protection but less onerous and costly than those seen elsewhere. The Review of Financial Products and Providers includes a wide range of legislation and there are two key Bills that are now being addressed.

The Financial Service Providers (Registration and Disputes Resolution) Bill sets out a system for regulation of all financial service providers. It also requires all financial providers to be part of a disputes resolution process to protect customers.

The Financial Advisers Bill establishes a co-regulatory regime for financial advisers and the creation of approved professional bodies.

The issue of under-insurance continued to be one of concern for communities, local and central government, following flood and other weather related events during the year, and also as a result of the Gisborne earthquake in December 2007. Large parts of the community were clearly seen to be under-insured, or not insured at all, and this created significant suffering for many families and businesses and also placed a strain on the wider community.

New Zealand is an earthquake-prone nation and this was acutely reinforced by the Gisborne earthquake occurrence. The Insurance Council's response team, working closely with the Earthquake Commission and the local authorities, received very positive feedback from the community affected by the earthquake. The reputation and image of the insurance industry was clearly strengthened by our members' response to the event.

Climate change continued to challenge the nation and the industry. We saw a wide range of increased flood events. Particularly hard hit was the northern part of the North Island where some areas of Northland were hit repeatedly by similar events, and the payout of over $60 million by the insurance industry for a single storm event alone. A key change was signalled in the media when the Prime Minister indicated that some towns may have to seriously consider how sustainable they are, given their exposure to repeated weather events. The Insurance Council certainly agrees with the government stance on the importance of sustainable communities through risk mitigation and adequate insurance protection and it is pleasing to see local authorities beginning to respond positively.

Perhaps a disappointing aspect of the past year was the approach of the Fire Service to suggestions that the insurance industry was not fully participating in payment of Fire Service levies where due. While the industry strongly disagrees with the application of tax to insurance premiums, the industry also prides itself in its compliance with legal requirements. Dialogue is ongoing with the Fire Service on its approach to the collection of Fire Service levies and the auditing of companies within the industry.

It was also with some disappointment we saw the government back away from its options following a review of the Fire Service Act. The Council believes this was an opportunity to enhance the efficiency and funding of the Fire Service. With no change happening we will continue to advocate a better way to fund the Fire Service.

In respect of the law and order issues, the insurance industry continues to be concerned at the relatively low priority placed on what is perceived to be petty crime in the form of breaking and entering and conversion of motor vehicles. The Insurance Council has long maintained that these, so called, petty crimes are often the training grounds of career criminals and has been lobbying government to put increased emphasis on detecting young offenders as they enter the system, and taking early remedial steps.

The New Zealand Police continue to do an outstanding job however require greater resources to successfully operate in an environment where criminals are increasingly sophisticated. The Insurance Council will continue to work closely with New Zealand Police.

The issue of fraud remains an industry concern, particularly as evidenced more recently in respect of Travel policies. The insurance industry works closely with government departments to try and avoid New Zealanders ending up with insurance policies being declined on the basis of fraudulent statements.

Once again we had an outstanding contribution to the work of the Insurance Council from the Standing Committees. I would like to thank, on behalf of the Board and the Staff of the Insurance Council, all members of companies who provided their time and professional knowledge to the workings of the Insurance Council's committees.

Our work with key partners including the members of IBANZ, the Insurance & Savings Ombudsman, AICLA, and other industry professionals, continues to be a high priority for the Insurance Council.

The Insurance Council has maintained a strong financial situation. Levies for the Insurance Council have not been raised for ten years now and we have continued to provide increased services to our members. The image of the industry continues to be enhanced and is increasingly positive despite the challenges presented by the significant range of issues we have addressed during the year.

I would like to thank the Board of the Insurance Council and my colleagues here for their outstanding contribution to the success of the past year.

Christopher Ryan
Chief Executive

Insurance Council of New Zealand

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