COMPLIANCE NEWS – INSURERS
MARCH ISSUE | 2019
This month we look at the Government’s intention to take action against sales incentives in the insurance sector, the passing of the Earthquake Commission Amendment Act 2019, and the proposed new financial advice regime and how it will affect your organisation. We also provide our general update on relevant legislation.
GOVERNMENT INTENDS TO TAKE ACTION AGAINST SALES INCENTIVES
The Government is taking action in light of the Financial Markets Authority and Reserve Bank of New Zealand’s report on conduct and culture in New Zealand life insurers (Report) released in January 2019.
The Government has agreed to prioritise customer protection measures raised in the Report including making regulatory changes to the way sales incentives in the insurance sector are addressed.
The Report noted that sales incentives including high value upfront commissions and soft commissions (such as overseas trips) can cause a conflict of interest between the salesperson and the potential policyholder.
A consultation paper on proposed regulatory change is intended to be released by May. In consideration of the feedback obtained through the consultation process, the Government intends to introduce relevant legislation later in 2019.
We will advise you once a consultation paper is released and when any relevant legislation is introduced. In the meantime, please contact us if you have any questions on the Report.
CHANGES TO THE EARTHQUAKE COMMISSION ACT 1993
PASSED BY PARLIAMENT
The Earthquake Commission Amendment Act 2019 (Amendment Act) has now been passed by Parliament. A number of changes have been made to the Earthquake Commission Act 1993 (Act) which are effective immediately including:
- Extending the timeframe for lodging a claim from three months to two years; and
- Providing the Earthquake Commission (EQC) the ability to share information (as necessary) to settle insurance claims.
The remaining changes to the Act will be phased-in over a 12 month period beginning July 2019 as existing insurance policies are renewed or replaced. These changes include:
- Removing the insurance cover previously provided by the EQC for contents; and
- Increasing the cap on residential building cover provided by the EQC to $150,000.
Please contact us if you have any questions on the Act or Amendment Act and how it may affect your organisation.
TIME TO CONSIDER THE WAY YOUR ORGANISATION WILL PROVIDE FINANCIAL ADVICE UNDER THE PROPOSED NEW FINANCIAL ADVICE REGIME
The proposed new financial advice regime intends to change the way advice will be provided to customers. The proposed new financial advice regime will remove the current requirement that financial advice can only be provided by a natural person as an adviser type (registered and authorised financial advisers, and QFE adviser).
Under the proposed new regime, financial advice can be provided by an individual or business. Individuals can provide advice directly (for example, in person). Businesses can provide advice directly (for example, online), through a financial adviser, or through a nominated representative.
Any individual or business providing financial advice must comply with a code of conduct setting out the professional standards for competence, skill, knowledge, ethical behaviour, and client care. This code of conduct is currently being developed by an independent code work group. The individuals and businesses providing advice must also comply with the financial advice rules and regulations set out in the Financial Markets Conduct Act 2013.
Please contact us if you would like us to assist with your decision on the best structure for your organisation under the proposed new financial advice regime.
Review of the Insurance (Prudential Supervision) Act 2010
The RBNZ has suspended active work on the review of the Insurance (Prudential Supervision) Act 2010 in consideration of RBNZ’s review of resourcing and priorities. The suspension will be reviewed regularly. We will notify you when work on the review resumes.
Financial Services Legislation Amendment Bill
The Financial Services Legislation Amendment Bill (FSLA Bill) is still before the Committee of the Whole House. The FSLA Bill is an omnibus Bill which makes amendments to the Financial Markets Conduct Act 2013 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. A number of regulations are in the process of being made to support the measures in the Bill. The intention is for the FSLA Bill to pass early 2019.
Any individual or organisation intending to provide financial advice after the FSLA Bill is enacted must apply for a licence. To help with the transition into the new regime, there will be two phases to the licensing process (transitional and full). We will advise once you can apply for a transitional licence.
Insurance Contract Law Review
The Ministry of Business, Innovation and Employment is completing a review of New Zealand’s insurance contract law. The purpose of the review is to ensure insurance markets work well, and enable individuals and businesses to effectively protect themselves against risk. The Minister of Commerce and Consumer Affairs is currently reviewing the feedback it received following the release of an Issues Paper for consultation which close on 13 July 2018. We will update you as new information comes to hand.
Fair Insurance Code
The Insurance Council of New Zealand (ICNZ) is in the process of reviewing the Fair Insurance Code and the submissions received from the public. The ICNZ expects the new Fair Insurance Code will be introduced in 2019. We will update you as new information comes to hand.
Canterbury Earthquakes Insurance Tribunal Bill
The Canterbury Earthquakes Insurance Tribunal Bill is currently before the Select Committee. This Bill intends to establish the Canterbury Earthquakes Insurance Tribunal (Tribunal). The Tribunal will provide speedy, flexible, and cost-effective services to help resolve insurance claims between policyholders and insurers, and insured persons and the Earthquake Commission. Claims must relate to damage to residential buildings, property, or land caused by the series of Canterbury earthquakes which occurred in 2010 and 2011. We will advise you as new information comes to hand.
The Privacy Bill is currently before the Select Committee. Parliament is currently reviewing the submissions received from the public. We will update you when new information comes to hand after the submissions have been reviewed.
Disclaimer: The information contained in this newsletter is provided for informational purposes only, and should not be construed as legal advice on any matter.