Feedback from our consultation on the rules governing policyholder security in our insurance legislation will help to shape the final policy.

An important purpose of New Zealand’s insurance legislation is to promote a financially sound insurance sector. This consultation asked whether the current legislation gave policyholders the protection they expect.

“Our regulation of insurers is designed to reduce the risk that insurers will fail. Regulation requires insurers to monitor the risks they have taken on and encourages them to keep suitable reserves to deal with adverse events. However, we do not operate a zero failure regime and some risk of insurer failure remains,” Deputy Governor Christian Hawkesby says.

“Insurers are required to publish information that helps consumers assess their financial soundness (and therefore the risk of failure). Feedback from the consultation has confirmed our view that the financial information insurers are required to publish is broadly appropriate. However, there is scope to think about ways of presenting this information in ways that make it easier for consumers to understand,” Mr Hawkesby says.

The consultation also asked whether there should be a policyholder guarantee scheme for New Zealand. While industry stakeholders generally felt this would be costly and unnecessary, consumers were more open to the idea, but also had concerns about scheme coverage and how costs would be managed. We will be undertaking further analysis before making any decisions on this issue.

The policyholder security consultation is part of a multi-stage review of the Insurance (Prudential Supervision) Act 2010 (IPSA). We intend to publish in-principle policy decisions on all the issues raised for further feedback in 2023 before moving on to legislative drafting and implementation.

More information

• Review of the Insurance Prudential Supervision Act 2010
• Reserve Bank invites feedback on insurance policyholder protection, August 2021

© Scoop Media