COMPLIANCE NEWS – INSURERS
MAY ISSUE | 2019
This month we look at changes to the financial advice regime as a result of the Financial Services Legislation Amendment Act 2019, the Options Paper released by the Government on conduct of financial institutions, the submissions sought by the Government on the Options Paper for the insurance contract law review, and law reforms which will affect insurance products on new builds and significant alterations to property. We also provide our general update on relevant legislation.
CHANGES TO THE FINANCIAL ADVICE REGIME MADE BY THE FINANCIAL SERVICES LEGISLATION AMENDMENT ACT 2019
The Financial Services Legislation Amendment Act 2019 (Act) received Royal Assent on 8 April 2019. The Act 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 being prepared for consultation and in the process of being made to support the measures in the Act.
The Commerce and Consumer Affairs Minister expects to finalise the Financial Advice Code in the next coming months. Individuals and organisations providing financial advice will need to meet any new competency standards and comply with the Code. On 10 April 2019, the Financial Advice Code Working Group released the submissions made during the Code’s consultation period. A summary of these submissions, responses from the Financial Advice Code Working Group on points raised in the submissions, and an impact analysis will be published when the Code is approved and finalised.
The relevant provisions in the Act (for example, the duties on individuals and organisations giving financial advice) are expected to come into effect in the first half of 2020. Applications for transitional licences will open after the Code has been approved later this year.
Please contact us if you have any questions on the Act or would like any assistance on transitioning to the new financial advice regime.
CONSULTATION OPENS ON OPTION PAPER RELEASED ON THE CONDUCT OF FINANCIAL INSTITUTIONS INCLUDING INSURERS
The Ministry of Business, Innovation and Employment (MBIE) has released an Options Paper and initiated a consultation process on the conduct of financial institutions including insurers. These new measures are aimed at safeguarding consumers’ dealings with insurers.
MBIE has identified the following key problems which have been identified as part of recent reports from the Financial Markets Authority and the Reserve Bank of New Zealand:
- An imbalance of power between financial institutions and consumers;
- Some products are not designed with good customer outcomes in mind;
- Sales are prioritised over good customer outcomes;
- Weak systems and controls to manage conduct risk; and
- A lack of accountability to ensure good conduct.
Other ongoing problems include little-to-no post-sales communications on customer outcomes, and communication breakdowns when claims take a long time or disputed.
Submissions on the Options Paper are due on or before 7 June 2019. Please contact us if you have any questions or would like assistance with making a submission on the Options Paper.
CONSULTATIONS OPEN ON INSURANCE CONTRACT LAW OPTIONS PAPER
The Ministry of Business, Innovation and Employment (MBIE) has released an Options Paper for the insurance contract law review. The Options Paper covers the following three key topics:
Disclosure of information to insurers – the Options Paper offers four different options as a means to address disclosure concerns.
- Changing the law so that insured would simply only have to answer insurers’ questions truthfully and accurately.
- Changing the law so that insured would have to disclose what a reasonable person would know to be relevant.
- In addition to the above two points, require life and health insurers to use third party records (for example medical records) to underwrite risk.
- In addition to the top two points, have lighter consequences for innocent failures to disclose information.
Unfair contract terms – the Options Paper offers two different options as a means to address unfair contract terms concerns.
- Remove the insurance specific exemptions to the unfair contract terms rules in the Fair Trading Act 1986.
- Remove the insurance specific exemptions but change the unfair contract terms in the Fair Trading Act so that it is easier to understand how the rules apply to insurance contracts.
Making it easier to read and compare policies – the Options Paper offers five different options to make it easier to read and compare policies.
- Require plain language insurance policies.
- Require core policy wording to be clearly defined.
- Require a summary statement to be provided.
- Require insurers to work with third-party comparison platforms.
- Require insurers to disclose key information.
Submissions are due on or before 28 June 2019. Please contact us if you have any questions on the Options Paper or would like assistance with making a submission.
CONSULTATION OPEN ON LAW REFORMS WHICH WILL REQUIRE GUARANTEES AND INSURANCE PRODUCTS FOR ALL NEW BUILDS AND SIGNIFICANT ALTERATIONS
The Ministry of Business, Innovation and Employment (MBIE) has released a Discussion Paper advising that consultation is open for proposed building law reforms. These law reforms will require guarantees and insurance products to be put in place for all new builds and significant alterations to a property. The guarantees and insurance products would fund the fixing of issues or compensation to be paid.
MBIE proposes that the insurance product would be in place for 10 years from the date the work is completed. The homeowner will be the policy holder of the insurance product allowing them to make a claim directly with the insurer. Information on the insurance product will be recorded on the land information memorandum (LIM) which will advise potential new owners that the building was covered. The insurance product can be transferred to any new owners.
MBIE advises that the success of this proposal depends on the ability of the insurance market to meet the anticipated demand. Submissions are due by 5pm 16 June 2019. Please contact us if you have any questions on the Discussion Paper or would like assistance with making a submission.
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.
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.
Canterbury Earthquakes Insurance Tribunal Bill
The Canterbury Earthquakes Insurance Tribunal Bill (Bill) has moved on to its Second Reading. 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 on the progress of the Bill as it progresses in Parliament.
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 general purposes only, and should not be construed as legal advice on any matter.