General insurers welcome review of insurance contracts law
The Insurance Council welcomed the release of the terms of reference for the Insurance Contracts Law Review on Tuesday.
“We welcome the review and look forward to contributing to it,” said Insurance Council Chief Executive, Tim Grafton.
“There are currently a large number of laws that impact on insurance contracts in New Zealand. This review will be an opportunity to assess and possibly consolidate those laws in a way that serves everyone.”
General insurers already self-regulate to a much greater degree than current regulations require. ICNZ members, which comprise 95% of general insurers in New Zealand, adhere to the Fair Insurance Code, an industry best practice standard. The Code sets out how consumers and insurers must deal with each other, including covering matters of non-disclosure and complaints timelines and processes. Any issue that cannot be solved directly with an insurer may be escalated to an independent external disputes resolution scheme, something all insurers must be members of.
One issue highlighted in both the terms of reference and by the Minister is the way matters of non-disclosure are handled. The Code requires our members to respond reasonably to what an insured does not disclose and leaves the test of what is reasonable to the independent dispute resolution schemes to determine.
“Out of 1.2 million insurance claims made last year to our members, only 243 complaints were transferred to external dispute resolution schemes. Of those, only 19 were fully or partially upheld,” said Grafton. “We are confident our members are doing a good job.”
Another issue highlighted in the terms of reference was the ability of consumers to make comparisons by price.
“We do not favour simple price comparisons for insurance because it encourages vulnerable people to buy solely on price and not consider whether the product is appropriate for their needs,” said Grafton.
“Insurance is not a commodity like electricity, so we need to be mindful of the need to encourage informed consumer choice. It’s incredibly important that consumers understand the ins and outs of any policy they buy. This is an important part of building financial capability. By reducing insurance solely to comparable prices, we worry consumers will be deprived of the opportunity to truly understand and consider what they’re purchasing.”
ICNZ is currently reviewing the Fair Insurance Code to ensure it remains fit for purpose. An updated Code is expected to be released in 2019.