Insurance market overdue for overhaul
4 December 2019
Consumer NZ is welcoming law changes that will help fix major problems in the insurance market.
Consumer NZ head of research Jessica Wilson said her organisation had been campaigning for an overhaul of insurance laws that were failing to protect consumers from junk products and unfair terms.
“There are significant problems in the insurance market, resulting in consumers being denied cover under their policies and sold poor-value products,” Ms Wilson said.
The government has now agreed to change the law to beef up protection for consumers. Changes announced today include increasing protections against unfair terms in insurance contracts.
“Insurance is the only industry that’s largely exempt from the Fair Trading Act’s ban on unfair terms in consumer contracts,” she said.
“This exemption allows insurers to sell products that provide little value to consumers and means companies can use terms in their contracts that would be open to challenge in any other industry.”
Consumer NZ has also been calling for insurers’ wide-ranging rights to reject claims to be reined in.
Ms Wilson said companies had significant discretion to decline claims if they considered the consumer hadn’t disclosed information the insurer believed it had a right to know.
“This can happen regardless of whether the consumer was made aware they needed to disclose the information.”
The government has agreed to change the law to put responsibility on insurers to ask for the information they need, rather than leave it up to the consumer to guess what they should disclose.
Ms Wilson said these changes should prevent insurers from unreasonably declining claims, which was a significant cause of complaint.
Other changes announced today include requiring insurance policies to be clearly written and easy to understand.
The Financial Markets Authority will also be given powers to monitor the industry and prosecute companies that fail to comply with the new rules.