The Legal Framework for General Insurance in New Zealand

Insurance Council Membership

The Insurance Council of New Zealand is the industry representation body for fire and general insurance in New Zealand. Information on the Council and the insurance industry in New Zealand can be found at www.icnz.org.nz/.

The Council is active in self-regulating the insurance industry. The Council promotes the Fair Insurance Code that requires insurers to act ethically. The Council funds the Insurance & Savings Ombudsman Scheme that offers independent review of decisions and applies a Council solvency test that confirms the financial stability of its members. The Council also requires members to be independently rated and to publish these ratings. The Council performs an important role in informing and educating consumers about key insurance issues and risks.

The Council has 25 members which write the substantial majority of New Zealand's insurance business. Members currently protect approximately $0.5 trillion of New Zealanders' assets and in 2010 paid $2.1 billion in claims.

Through effective advocacy and communication the Council aims to assist members in key areas affecting their business. The Council is governed by a Board of nine controlling officers appointed annually by the members. The day to day affairs of the Council are managed by the Chief Executive and a team of six other people.

Application for membership

Any person, company, corporation, association, incorporated body or other legal entity carrying on the business of insurance underwriting or reinsurance in New Zealand may apply to become a member of the Council. Applications for membership to the Council will be considered by the Board. Applications should be addressed to the Chief Executive.

There is no application form as such. Applications are to be in writing and set out the following:

• the nature of the business of the applicant and its authority to act as an insurer;
• the applicant's financial position including details as to issued and paid up capital, shareholders funds and net tangible assets;
• details of the applicant's history and experience in the insurance industry;
• a copy of the applicant company's certificate of incorporation; and
• details of any convictions of the applicant or in the case of the applicant company's officers.

Solvency requirements

Members of the Insurance Council previously used to be required to complete, on a form prescribed by the Council, a Statement of Solvency, accompanied by an auditor's certificate. Members are now required to abide by the solvency requirements set out in the Insurance Prudential Supervision Act 2010.

Companies that are branches of overseas parent companies must comply with the Insurance Prudential Supervision Act 2010, but must also provide to the Council, on an annual basis, and within four months of the end of their financial year, either:

• a letter from the parent company's auditors stating the parent company meets and continues to meet the solvency and regulatory requirements of the parent company's home country; or
• a declaration from the parent company's supervisory and regulatory authority confirming that the parent company continues to be licensed to operate in that country and has fulfilled the regulatory obligations imposed on it.

Companies that are reinsurers must comply with the Insurance Prudential Supervision Act 2010, but must also provide on an annual basis, and within six months of the company's year end, a letter from the parent company's auditor stating the parent company continues to meet the solvency and regulatory requirements of the home country's regulatory authority as at the latest balance date.

Dispute resolution scheme

Insurance Council members are required to abide by the dispute resolution requirements set out under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

Fair Insurance Code

Members are required to abide by the Council's Fair Insurance Code. This is a code of practice, which has been developed by the Insurance Council following extensive consultation with the industry, consumer rights groups, the government, the Insurance and Savings Ombudsman and other interested parties. The Code outlines basic obligations which insurers must meet as well as the insurers' expectations of customers. All Insurance Council members are expected to have an internal disputes complaints procedure in place.

A copy of the Code can be found at www.icnz.org.nz/downloads/fic-2010.pdf.

Industry statistics

There is a general lack of general insurance industry statistics. Each quarter a third party on behalf of the Council collects from members a confidential return outlining premium income and claims by class of business, as well as expenses and staff numbers.

This information is aggregated and returned to members showing the quarter's results and results for the 12 months ending that quarter. Annual statistical information as at 30 September each year is available on the Council's website, within each Annual Insurance Industry Review - www.icnz.org.nz/news/review/.

Individual company information remains confidential to the Council's Chief Executive, although, following agreement by all members, the Council has published each member's Gross Written Premium for the 12 months ending 31 December. This is made available for members' information only and is not for general distribution.

Insurance Claims Register

The Insurance Council also runs the Insurance Claims Register which Council members are able to join. The Insurance Claims Register ("ICR") was established in February 1999 in order to detect and prevent fraud, particularly purposeful non-disclosure, and double dipping at claim time. It gives participating insurers the ability to check the accuracy of data submitted with policy applications and claims.

The ICR is an electronic register that holds a central record of all claims lodged with participating insurance companies, so that those companies can access a claims history of a client, when underwriting new business and processing claims, for the specific purpose of checking for fraud. The participants in the scheme report that savings from identifying fraud and potential fraud are significantly in excess of the cost of the ICR to them.

Membership fees vary between participating members. For further information on fees please contact the Council.

All participating insurers are required to adjust their privacy wordings and advise clients that their claims information will be lodged on the ICR. Customers have the right to object to this happening. Insurers equally have the right not to insure customers who object to their claims being held on the register. Further information on the ICR can be found at http://www.icnz.org.nz/fraud/register/.

Levies

Members are required to pay an annual levy. In addition to the annual subscription, members may be required to pay such levies as the Board shall from time to time assess to meet any abnormal items of expenditure.

Levies are currently assessed on the following basis:

• all members are required to pay a minimum levy of $12,500; and
• members are required to pay a fee based on their Gross Written Premium up to a maximum levy of $100,000. In the case of reinsurers, members are required to pay the minimum levy plus a fee based on the facultative income for the business.