Proposed changes should help industry, insurers say

New Zealand life insurers are unfazed by proposed changes coming for insurance contract law.

Thursday, December 5th 2019, 7:07PM

Commerce Minister Kris Faafoi this week announced plans that he said should give consumers more certainty when it came time to claim.

Among them was a requirement for insurers to ask the right questions to obtain necessary information from applicants – not put the duty of disclosure solely on clients – and to deal with customers who do not disclose something material "proportionately".

They will also have to present information in a way that customers can understand.

Naomi Ballantyne, managing director of Partners Life, said the proposals would not change a thing for her company as they currently stood. Some details are still to be worked through.

"We have always believed we need to ask the client the questions we need answered as clearly as possible to enable them to fully disclose and if we don’t ask we take responsibility. Our new automated application capture and underwriting engine (MUM) takes a huge leap forward in terms of ensuring questions are asked in the way consumers think about their health rather than the way insurers want to ask them. We agree wholeheartedly with this requirement," she said.

"We have also always had a 'fair and reasonable' provision in our policy wordings which protects the client against a 'punishment that outweighs the crime' when it comes to non-disclosure. We simply re-underwrite at application date based on the correct information and then provide cover on the basis of that 'corrected' underwriting. In other words the client is not better off or worse off than they ever should have been. We therefore also agree wholeheartedly with this requirement."

At Fidelity Life, Anna Black, chief risk officer, said the insurer supported the review because it wanted to see increased confidence and trust in insurers.

"In particular we’re pleased to see progress on the duty of disclosure, which in our view has become outdated. We look forward to seeing the draft legislation in due course and providing further feedback to ensure we finish with a good result.

"We’re pleased to see these and other proposed regulatory changes align with our goal for a successful and sustainable future with the customer at heart of everything we do.”

Katrina Shanks, chief executive of Financial Advice NZ, said the proposals should make the process of taking out insurance easier and simpler to understand for consumers.

“These proposed changes are not before time.

“A recent survey of our 1,680 adviser members showed that among the most common mistakes consumers make when it comes to insurance is not understanding their policy limitation. That generally comes down to how they are written.

“In fact, some 95% of advisers said the language and complexity of policies make it difficult for consumers to understand them, without specialist advice, while 97% said the language and complexity makes it difficult for consumers to compare policies."

She said the association thought the rules would take a lot of the uncertainty and confusion out of insurance policies.

“From what our advisers tell us, there is clearly a high level of misunderstanding and a lack of understanding when consumers look at insurance, and I’m confident these proposals will help deliver solutions that work and meet consumers’ needs.”

The Financial Services Council, which represents most of the country's life insurers, also supported the plans.

“The scope of the measures released is comprehensive and has a clear focus on improving outcomes for consumers," said chief executive Richard Klipin.

“They represent a modernisation of this technically complex area and will provide greater certainty, clarity and transparency for consumers.

“Managing risk through insurance is key for Kiwis and this package of changes will help make it easier, simpler and more accessible for all of us to ensure that we have the insurance cover we need."

He said the FSC's own code of conduct had already set its members out on this path.

"We now look forward to working through the proposed changes in detail and engaging constructively with the Government in the consultation process."

Tags: Fidelity Life Financial Advice New Zealand FSC Partners Life