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NZ Insurers fall below conduct expectations

Friday 30 July 2021

 

New Zealand General insurers might be struggling when it comes to dealing with the conduct and conduct risk and are not going to be prepared for the Financial Markets (Conduct of Institutions) Amendment Bill.

The bill is currently at its second reading in New Zealand Parliament. 

In official statement from New Zealand’s Financial Markets Authority (FMA),” General insurers are not prepared for new legislation that will require them to establish systems and processes to ensure good conduct and fair treatment of customers, according to the Financial Markets Authority (FMA)”.


The report entitled Insurance conduct  and culture : Fire and general insurers update recommended  that insurers to review their operations, since only IAG and MAS have been meeting the regulatory operations. 

This report comes after FMA Reserve Bank of New Zealand (RBNZ) Released the
Life Insurer Conduct and Culture Review in 2019

In the 2019 report they found several conduct issues that were comparable with those that came out of the Royal Commission in the banking and Financial Services but would “…not currently categorise these issues as widespread.”

The Life Insurance report indicated,” Overall, our view is that life insurers have been too complacent when it comes to considering conduct risk, too slow to make changes following previous FMA reviews, and not focused enough on developing a culture that balances the interests of shareholders with those of customers.”
 

2021 General Insurance Report
FMA Director of Banking and Insurance Clare Bolingford said in an official statement about the General Insurance report, “While new legislation is not yet in place, core conduct standards should apply across the financial sector. We’ve made this point repeatedly over several years and provided various resources and published reports for this section of the industry to measure themselves against.”

Key findings as identified by the regulator:

  • The level of conduct maturity was low, with some insurers demonstrating that they did not see conduct and culture as relevant to their organisation
  • Product and policy-holder processes need to be improved
  • Insurers need to have a clearer line of sight on commissions paid to intermediaries, including whether they are fair and reasonable to customers, and understood by customers
  • Insurers should have greater oversight of how intermediaries are selling and managing the insurers’ products
  • Many boards are yet to support the development of an organisational structure that promotes good conduct, rebalances shareholder and customer interests, and sets an appropriate conduct risk appetite
  • Not enough has been done to ensure remediation activity is completed promptly and addresses the root cause of issues.