COMPLIANCE NEWS – INSURERS
MAY ISSUE | 2020
This month we look at the FMA’s continued focus on conduct regulation, health and safety guidelines for workplaces opening during COVID-19 Alert Level 3, a comprehensive list of deferred regulatory initiatives issued by the Council of Financial Regulators, and the new Fair Insurance Code.
We also provide our general update on relevant legislation.
FMA CONTACTS MARKET PARTICIPANTS, TAKES “NO ACTION” APPROACH
On 17 April, Financial Markets Authority Chief Executive Rob Everett wrote a letter to the CEOs of all licenced firms, banks, insurers, and several industry associations. The letter outlined the FMA’s expectation that financial market participants treat their customers fairly in all interactions, and notes the following focus areas:
- Customers who are financially vulnerable as a result of changed circumstances. Mr Everett notes lowering fees and removing barriers to products and services as possible considerations.
- Proactive and regular communications. Examples include proactively approaching customers, increased call-centre staffing, and training staff to handle distressed customers.
- Operational resilience and conduct risk management.
The letter illustrates the FMA’s continued focus on conduct issues and regulation despite COVID-19 complications.
The FMA has also released guidance on its discretionary “no action” approach to regulatory breaches resulting from COVID-19. In recognition of the practical difficulties faced by financial market participants, the FMA will take “no action” against those that seek relief from the FMA following a regulatory breach caused by COVID-19.
The “no action” approach is an expression of regulatory intention and does not prevent other parties from taking legal action in respect of the breach. It is not intended to apply to ongoing and open-ended breaches that involve a significant risk of detrimental effects on customers. Past and inevitable COVID-19 related breaches should be reported promptly.
The FMA still expects breaches to be remedied. Compliance with regulatory obligations is delayed, not removed. Market participants are also expected to mitigate risks resulting from breaches.
The FMA is taking this approach to limit the detrimental effects that can arise where uncertainty leads to increased operational and regulatory burden. Market participants that need “no action” relief must contact the FMA at email@example.com and explain:
- who needs relief;
- what relief is needed from; and
- why relief is needed (as a result of COVID-19).
The FMA will acknowledge the application, consider it, and contact applicants if further information is required. Decisions will be notified by email. The relief that is granted may be specific to an individual entity or may apply to a class of market participants.
Please contact us if you have any questions about the FMA’s focus on conduct issues and the “no action” approach.
HEALTH AND SAFETY GUIDELINES FOR FINANCIAL SERVICE BUSINESS OPERATING UNDER COVID-19 ALERT LEVEL 3
New Zealand transitioned into COVID-19 Alert Level 3 on 28 April. While more economic activity can take place, the rules are no different for most institutions. Financial services businesses and staff that can operate from home must continue to do so. Workplaces may be reopened only if work cannot be done from home and the workplace can be operated within public health guidelines. Those who are unsure what activities can take place are urged to contact the FMA or Reserve Bank. Businesses must not treat the move from Level 4 to Level 3 as an opportunity to reopen workplaces quickly and in an unsafe fashion.
The FMA and RBNZ have provided guidelines for financial services businesses that require staff to be physically present in the workplace during Alert Level 3. The requirements are extensive and include specific obligations in relation to physical distancing, contact tracing, customer interaction, and other transmission risks. The guidance has been forwarded to WorkSafe for their endorsement and is therefore subject to change.
Any business that reopens a workplace must create a formal plan detailing how it will deal with COVID-19 risks and keep people safe. Businesses do not have to submit the plan in order to operate, but must produce it on request by WorkSafe.
Please contact us if you have any questions about your health and safety obligations in the context of COVID-19.
COMPREHENSIVE LIST OF DEFERRED REGULATORY INITIATIVES
Last month we identified several instances of regulatory pressure being eased in response to the COVID-19 crisis. The Council of Financial Regulators (COFR) has since released a comprehensive list of the regulatory initiatives that have been deferred. COFR is made up of the Reserve Bank of New Zealand, the Financial Markets Authority, the Commerce Commission, the Ministry of Business, Innovation, and Employment, and the Treasury.
The following deferrals are of note for the insurance industry:
- The Financial Markets Authority has broadened the extension of financial reporting deadlines. FMC reporting entities with balance dates up to and including 31 July will also have a further two months to provide audited financial statements where their ability to produce financial statements is legitimately impacted by COVID-19.
- The new financial advice regime is delayed until March 2021 at the earliest. The Financial Advisers Act 2008 continues to apply in the meantime. Transitional licensing remains open and the window for applications will be extended until the deferred date. Transitional licences that have already been issued and the new Code of Professional Conduct for Financial Advice Services will come into effect when the new regime starts. Accompanying disclosure regulations have been delayed so commencement dates can be updated.
- External-facing work on the review of the Insurance (Prudential Supervision) Act 2010 has been deferred for at least six months.
- The Treasury’s review of property insurance affordability and availability has been “deferred for the time being”.
The deferrals are intended to enable financial services firms to focus their efforts on continuing to operate smoothly and provide support to individuals and businesses.
Please contact us if you have any questions about the way deferred regulatory initiatives will affect you.
NEW FAIR INSURANCE CODE TAKES EFFECT
The Insurance Council of New Zealand’s updated Fair Insurance Code took effect on 1 April. The Minister of Commerce and Consumer Affairs Hon Kris Faafoi praised the industry’s proactive approach to insurer behaviour and maintained focus on consumers.
The Code has been updated to clarify members’ commitment to act transparently, with integrity, and good faith towards their customers. Notable changes include:
- Commitments to:
- develop, market, and sell products responsibly;
- identify and address instances of poor conduct; and
- explain decisions accurately, clearly, concisely, and effectively.
- Enhanced provision for compliance with privacy obligations.
- A commitment to identify and respond to vulnerable customers in the event of a catastrophe or disaster by reference to Human Rights Commission’s guidelines.
- Guidance as to what constitutes a “significant breach” of the Code.
Please contact us if you have any questions about the Fair Insurance Code.
On 24 March Parliament was adjourned until 28 April because of COVID-19. While some Select Committees have been meeting via Zoom, very little Parliamentary activity has taken place in the past four weeks. Accordingly, there has been no progress on either the Financial Markets (Conduct of Institutions) Amendment Bill, the Fair Trading Amendment Bill, the Privacy Bill, or the Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill.
The Privacy Bill (Bill) completed its second reading on 7 August 2019 and still awaits a committee of the whole house.
Financial Markets (Conduct of Institutions) Amendment Bill
The Financial Markets (Conduct of Institutions) Amendment Bill passed its first reading on 12 February 2020. The Finance and Expenditure Committee is considering the Bill. Submissions were due on 30 April 2020.
Fair Trading Amendment Bill
The Fair Trading Amendment Bill passed its first reading on 12 February 2020. The Economic Development, Science, and Innovation Committee is considering the Bill. Submissions were due on 26 April 2020.
Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill
The Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill (Bill) was introduced to Parliament in December 2019. The Bill still awaits its first reading.
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. There is no timeline yet.
Review of the Insurance (Prudential Supervision) Act 2010
The Reserve Bank of New Zealand has paused work on the review of the Insurance (Prudential Supervision) Act 2010 in light of COVID-19 Alert Level 4.
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
Mitchell Souness/Law Clerk
P: 04 974 4707