MBIE has hinted at its preference for the establishment of a single entity to regulate the NZ financial services sector.
Its issues paper stated: “Taken together, the Reserve Bank, the FMA and the Commerce Commission regulate parts of the insurance sector, but no regulator has oversight of insurers’ and insurance intermediaries’ conduct during the full insurance policy ‘lifecycle’.”
…no regulator has oversight of insurers’ and insurance intermediaries’ conduct during the full insurance policy ‘lifecycle’
The issues paper was included alongside the commencement of public consultation for the Review of Insurance Contract Law.
Commerce Minister, Kris Faafoi, said New Zealand’s current insurance law is outdated and a Review is overdue (see: New Zealand’s Insurance Law…).
The Review addresses elements in the insurance process that have been found to cause problems for consumers, including disclosure of information to insurers and regulation and oversight of insurers’ conduct.
In a related document, MBIE stated that New Zealand is lagging behind other comparable overseas jurisdictions such as UK and Australia in this regard, both which have reformed their insurance contract law.
The issues paper referred to International Monetary Fund’s (IMF) Financial Sector Assessment Program where the IMF found that the regulation of insurers’ conduct is largely delivered through the regulation of financial advice in New Zealand (regulated by the FMA).
The paper also recognised the changes being made to the financial advice regime currently but noted the improvements would not “change the regulation of insurance products that are sold without financial advice (i.e. when a consumer makes the decision themselves about the insurance product they want and the insurer or their intermediary only executes the contract rather than giving financial advice).”
“Sales conduct in relation to insurance (where it does not involve financial advice), whether by insurance providers or others, is subject to fair dealing laws only (Part Two of the FMC Act), and is not covered by financial advice legislation.”
Faafoi said it is important that the review progresses as fast as possible.
“Provided that consultation confirms the need for change we aim to get new legislation introduced by the end of this term,” he said.
Click here to read the Issues Paper in full.