COMPLIANCE NEWS – INSURERS
NOVEMBER ISSUE | 2019
This month we look at regulations issued by the Government to support the new financial advice regime, draft regulations that will implement disclosure requirements for the new financial advice regime, and an announcement of changes to laws against unfair commercial practices.
We also provide our general update on relevant legislation.
UPDATE ON FINANCIAL ADVICE REGIME CHANGES
On 24 October the Ministry of Business, Innovation and Employment (MBIE) published regulations for the new financial advice regime being introduced by the Financial Services Legislation Amendment Act 2019 (FSLAA). As a result, the Financial Markets Authority (FMA) has also pushed back the date it will begin accepting transitional licence applications until 25 November 2019.
The Financial Services Legislation Amendment Act Commencement Order 2019 confirms 29 June 2020 as the commencement date for the new financial advice regime. All remaining parts of the FSLAA will come into force on that date.
The Financial Services Providers (Registration) Amendment Regulations (No 2) 2019 make two small additions to the information prescribed for registration to accommodate transitional licencing.
The Financial Markets Conduct (Fees) Amendment Regulations (No 2) 2019 prescribes the licensing fees that will apply to the new financial advice regime. The Financial Markets Authority (Levies) Amendment Regulations 2019 updates the Financial Markets Authority (Levies) Regulations 2012 with levies for the new regime. These regulations give effect to Cabinet’s decisions on licensing fees and levies in June this year. More information about licensing fees and levies is available on MBIE’s website.
Please contact us if you have any questions about the latest regulations or the new financial advice regime.
MBIE RELEASES EXPOSURE DRAFT FOR FINANCIAL ADVICE DISCLOSURE REGULATIONS
MBIE has released an exposure draft and draft for consultation seeking feedback on proposed regulations setting the disclosure requirements for the new financial advice regime. The draft regulations give effect to decisions on disclosure requirements made in February this year. Feedback is sought on whether the draft regulations achieve their policy intentions, whether they are workable in practice, and whether transitional provisions need to be included.
The draft regulations will amend the Financial Markets Conduct Regulations 2014 and prescribe the information that must be provided in accordance with section 431O of the updated Financial Markets Conduct Act 2013 (FMCA). The draft regulations include:
- the information that must be disclosed;
- the points at which the information must be disclosed;
- how the information must be disclosed; and
- a licence condition requiring a financial advice provider to keep a record of each disclosure make under the regulations.
Notably, the draft regulations give effect to the Government’s decision to require financial advice providers to make certain information available on their website (if they have one) and on request. The regulations are set to be passed in early 2020 in time for the commencement of the new regime in June. Feedback is due by 8 November.
Please contact use if you have any questions about the draft regulations.
GOVERNMENT PLANS TO STRENGTHEN LAWS AGAINST UNFAIR COMMERCIAL PRACTICES
Following consultation on a discussion paper released in December last year, the Commerce and Consumer Affairs Minister and Minister for Small Business have announced changes to laws against unfair commercial practices. In a release this September, the Ministers explain the Government’s intention to introduce legislation to:
- prohibit conduct that is “unconscionable” — serious misconduct that goes far beyond commercial necessity or appropriateness; and
- extend current consumer protections against unfair contract terms in standard form consumer contracts to business contracts worth less than $250,000.
This announcement comes amid MBIE’s review into insurance contract law in New Zealand. The ICNZ has expressed concerns that the extension of the prohibition of unfair contract terms to businesses be consistent with the insurance contract law review. There is also concern regarding the $250,000 distinction between small and large businesses being inconsistent with small businesses insurance premiums.
The unfair contract terms provisions in the Fair Trading Act 1986 (FTA) are currently only enforceable by the Commerce Commission. In a report released at the end of October, MBIE explains that businesses have little incentive to remove unfair contract terms until they are approached by the Commission. The report suggests MBIE will be looking into whether unfair contract terms should be actionable by private parties without previous declaration of unfairness.
Please contact us if you have any questions about the upcoming changes to laws against unfair commercial practices.
Review of the Insurance (Prudential Supervision) Act 2010
The RBNZ has resumed work on the review of the Insurance (Prudential Supervision) Act 2010. There is no timeline yet.
Fair Insurance Code
The Insurance Council of New Zealand (ICNZ) has set a date for the revised Fair Insurance Code (Code)to take effect. The revised Code will be released in 2020 and take effect on 1 April 2020
Key changes include obligations to “develop, market, and sell products responsibly” and to “identify and address instances of poor conduct” within organisations. Another feature of the revised Code is strengthened commitment to privacy and clarity in the dispute resolution process.
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 Hon Kris Faafoi has explained he considers the review a priority. A timeline is yet to be provided.
The Privacy Bill (Bill) completed its second reading on 7 August 2019 and now awaits a committee of the whole house. Minister of Justice Hon Andrew Little highlighted the key changes the Justice Committee (Committee) made in response to submissions.
Maritime Transport (Offshore Installations) Amendment Bill
The Maritime Transport (Offshore Installations) Amendment Bill (Bill), seeking to amend the Maritime Transport Act 1994 (Act), remains at Select Committee stage.
The Bill intends to strengthen the requirements of owners of offshore oil and gas installations to hold insurance for liabilities to the Crown and other third parties affected by oil spills. Claimants under sections 385B–D of the Act will be able to recover the insured amount from any person providing insurance or other financial security for such liabilities.
General insurers providing cover to owners of offshore oil and gas installations should be aware that in the future claimants might be able to come directly to them.
Disclaimer: The information contained in this newsletter is provided for general purposes only, and should not be construed as legal advice on any matter.
P: 04 974 4704
P: 04 974 4707