Scoop has an Ethical Paywall
Work smarter with a Pro licence Learn More
Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Govt to act to protect bank, insurance consumers

Hon Grant Robertson
Minister of Finance

Hon Kris Faafoi
Minister of Commerce and Consumer Affairs

29 January 2019

PĀNUI PĀPĀHO

MEDIA STATEMENT

The Government agreed at Cabinet today to fast-track customer protection measures in the financial sector.

A report released today by the FMA and RBNZ highlighted major issues in the insurance sector impacting on consumers. This follows a report on banking conduct and culture released in December. The problems highlighted in both reports are similar, Commerce and Consumer Affairs Minister Kris Faafoi says, though more extensive in life insurance.

”There are gaps in the regulation of the sector that are exposing consumers and we are going to address them. We need a regime where banks and insurers are focused on good outcomes for the consumer and are not conflicted by sales rewards.

“The report has found New Zealand life insurance industry has a culture that prioritises sales over customer interests and customers deserve better. Cabinet today agreed we are going to get rid of sales incentives in the insurance industry that are driving behaviour that is not in the best interest of consumers.

“Incentives such as overseas trips and loaded upfront commissions can cause a conflict for the salesperson. We have also heard about insurance policies being sold to people who are ineligible for cover, premiums continuing to be charged for a policy that’s no longer in effect, and policyholders not being effectively notified of increases in premiums.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

“This, with the findings from the earlier report on banking conduct and culture, mean that we have to take action. We plan to release a consultation paper on the changes by May and introduce legislation later this year,” Kris Faafoi says.

A comparison of life insurance commissions worldwide shows New Zealanders are paying a high rate of commissions – more than 20 percent of the cost of the premium. In comparison, consumers in Many European countries pay less than 10 percent, and in Australia just over 10 percent. Annual premiums paid by consumers for life insurance total $2.57 billion, with 4 million life insurance policies in New Zealand.

Minister of Finance Hon Grant Robertson says that while the industry has started to address issues raised in the reports it is clear that the Government needs to act on regulation and conduct of financial institutions, including banks.

“We want to see:

- Clearer duties on banks and insurers to consider a customer’s interests and outcomes, and to treat customers fairly.

- An appropriately resourced regulator to monitor the conduct of banks and insurance companies, with strong penalties for breaching duties.

- Changes applied to both banking and insurance, since the issues identified in both are similar. There are also overlaps between the sectors, with banks often selling insurance products.

- A strong response to internal sales incentives and soft commissions.

“Because the issues identified with insurance and banking are similar, we will consider changes that apply across both sectors.

“Also, while this report focuses on life insurers, it’s possible the vulnerabilities it identifies may exist across the broader insurance industry.

“We will consult with the public and industry on these changes, but we are going to move as quickly as possible on this because New Zealanders need to have confidence their rights and interests are being protected."

Kris Faafoi says the consultation on these measures will run alongside work already underway to update insurance contract law.

“Current contract law is based on legislation that was written more than 100 years ago – and there are a number of improvements that need to be made. These include better disclosure protections for consumers, to address situations where insurers can completely avoid a policy when a policy holder does not disclose something – even if it was an unintentional non-disclosure or one unrelated to the claim a policy holder is making.

“It is an ambitious timeframe but my intent is to have both pieces of legislation in Parliament by mid-2020, because it is time to ensure consumers get protection that is clearly needed.”

The FMA is supplying individual feedback to the 16 life insurers reviewed, with a response and action plan on how they will address their issues due back to the FMA by June 2019.

ends

© Scoop Media

Advertisement - scroll to continue reading
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines


Gordon Campbell: On The Perils Of Joining AUKUS Pillar Two


The lure for New Zealand to join the AUKUS military alliance is that membership of only its “second pillar” will still (supposedly) give us access to state of the art military technologies. As top US official Kurt Campbell said during his visit to Wellington a year ago:
...We've been gratified by how many countries want to join with us to work with cutting-edge technologies like in the cyber arena, hypersonics, you can go down a long list and it's great to hear that New Zealand is interested...
More


 
 


ACT: New Zealand Dodges Dopey Experiment In Prohibition

“Labour’s attempted crackdown on smokers would have delivered criminal groups a near-monopoly over the cigarette trade,” says ACT Health spokesman Todd Stephenson... More


Government: Backs Police To Crackdown On Gangs
The coalition Government is restoring law and order by providing police new tools to crack down on criminal gangs, says Justice Minister Paul Goldsmith and Police Minister Mark Mitchell. “Over the last five years gangs have recruited more than 3000 members, a 51 per cent increase... More


Government: Humanitarian Support For Gaza & West Bank

Winston Peters has announced NZ is providing a further $5M to respond to the extreme humanitarian need in Gaza and the West Bank. “The impact of the Israel-Hamas conflict on civilians is absolutely appalling," he said... More


Government: New High Court Judge Appointed

Judith Collins has announced the appointment of Wellington Barrister Jason Scott McHerron as a High Court Judge. Justice McHerron graduated from the University of Otago with a BA in English Literature in 1994 and an LLB in 1996... More

 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels


 
 
 
 

Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.