NZ Insurers Need to Look Closer at Australian Royal Commission, Regulators Warn

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Another message included in the RBNZ and FMA’s joint report on life insurers’ conduct and culture (click here), is for New Zealand life insurers to make a closer assessment of key themes and issues that arose from the Australian Royal Commission.

In their report, the regulators state that insurers were confident that issues identified by the ARC were unlikely to be found in New Zealand, however they consider this confidence to be ‘misplaced’.

“Overall, insurers did not know enough about what issues may exist in their business, and there was insufficient effort made to discover them,” the report stated. “There was also a lack of analysis of their systems, processes and controls against matters highlighted by the ARC and related investigations (such as the investigation into CommInsure).”

The report confirmed that fewer than half of the 16 insurers reviewed had undertaken some form of analysis by the end of the review.

“A few of the insurers were quick to differentiate their business from the Australian market based on a single point of difference (eg the ARC examples of fees for no service, targeting vulnerable customers, or the issues associated with a vertical integrated business model did not apply to them),” the report stated.

“Based on this, they appeared to conclude the findings were not relevant to their business. This points to a potential lack of appreciation among New Zealand insurers of the possible drivers of the issues identified in Australia or the broader implications of the issues being highlighted by the ARC for their business.”

The RBNZ and FMA said they expect all insurers to proactively review the work of regulators and related international examples to help identify potential conduct and culture issues in New Zealand.

The regulators confirmed they will continue to review the insurers’ progress as part of their ongoing monitoring of the insurance sector.