FMA releases guidance on insurance customer’s vulnerability

Earlier this month, the Financial Markets Authority (the FMA) published an updated guidance sheet setting the expectations for how financial service providers should deal with vulnerable customers. 

The guidance defines a vulnerable customers as someone who “due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”  The guidance suggests that vulnerability is determined by circumstances rather than a particular ‘type’ of person.  Possibility indications of vulnerability in a particular customer may include income and debt levels, language and literacy, stress and mental health issues.

The guidance sets out best practice for ensuring financial service providers:

  • provide adequate training to staff for identifying vulnerable customers;
  • have appropriate policies and procedures in place for when dealing with vulnerable customers;
  • understand the particular needs of good customer service and communication with vulnerable customers.

The FMA expects firms to be able to demonstrate that they have policies and procedures for dealing with customer vulnerability in place.

The guidance is very clear and provides various helpful examples of what best practice of dealing with vulnerable customers looks like. 

A copy of the guidance can be found here.  Please get in contact with us if you would like assistance in developing policies for dealing with vulnerable customers in your workplace.

RBNZ considering an insurance policyholder guarantee scheme

The Reserve Bank of New Zealand (RBNZ), has proposed the implementation of an insurance policyholder guarantee scheme with the intention to protect policy holders in the event of insurance company failings.

The scheme will require insurers to pay levies into a fund which will be available to compensate customers in the event the insurer is unable to meet its obligations to the insured.

The proposal is part of the ongoing Insurance (Prudential Supervision) Act 2010 (IPSA) review.  The RBNZ has noted that at this stage they are considering whether the scheme is worthy of further deliberation.  If successful, the scheme is intended to be implemented by mid 2023.

More details on the proposal can be found in RBNZ’s consultation document.  The RBNZ is accepting feedback on the proposal until 15 November 2021. 

Calls for unified agency for handling insurance customer complaints

Various consumer groups and organisations are proposing the creation of a unified agency for dealing with customer complaints in the financial services sector.  The groups say the unification of the Insurance and Financial Services Ombudsman, the Banking Ombudsman, the Financial Services Complaints Limited and the Fairway Dispute Resolution Service is needed to make the dispute resolution schemes more customer friendly.

The groups calling for this change include Consumer NZ, the Salvation Army, Fincap, Citizens Advice Bureau Ngā Pou Whakawhiriinaki o Aotearoa (CAB) and Christians Against Poverty.

The groups suggest that a unification of the four schemes will make dispute resolution more accessible for customers.  One example proposed by the Salvation Army was the case of a couple who had to make complaints to all four schemes due to each lender they were indebted to belonging to a different scheme.  This type of scenario makes it difficult for customers to navigate the differing processes across the schemes.  A single agency is expected to simplify the process for customers wishing to make a complaint.

The groups have also expressed the view that many New Zealanders are finding it difficult to access the dispute resolution schemes.  This is due to the current procedures being too complex, complicated and burdensome for individuals to navigate themselves.  The Citizens Advice Bureau argue that the existence of four schemes is confusing for customers, thereby discouraging customers from raising complaints which defeats the purpose of the schemes.

There is also the issue of the lack of consistency of rules and financial caps among the schemes.  Having a merged scheme would allow for the harmonisation of the rules in order to make the process more accessible for customers.

We expect to provide updates on this proposal in the future.


Financial Markets (Conduct of Institutions) Amendment Bill
The Finance and Expenditure Select Committee reported on the Financial Markets (Conduct of Institutions) Amendment Bill on 7 August.  The Bill now awaits its second reading.

Insurance Contract Law Review
The exposure draft Bill for consultation was anticipated to be released mid-2021.  We will continue to provide updates as they are released.

Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill
The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill has received its second reading and is now with the Committee of Whole House.

Elspeth Horner/Principal
E:  elspeth.horner@mhlaw.co.nz
P:  04 974 4702

Laura Sookahet/Senior Associate
E:  laura.sookahet@mhlaw.co.nz
P:  04 974 4701

Andrew Goble/Senior Solicitor
E:  andrew.goble@mhlaw.co.nz
P:  04 974 4704

Mitchell Souness/Solicitor
E:  mitchell.souness@mhlaw.co.nz
P:  04 974 4706

Patrick Gerard/Solicitor
E:  patrick.gerard@mhlaw.co.nz
P:  04 974 4707

Stacey Craig/Solicitor
E:  stacey.craig@mhlaw.co.nz
P:  04 974 4700