Consumer NZ says consumers are not getting a fair deal, following the results of their latest survey research report ‘Fixing the insurance market’.
Consumer NZ Chief Executive, Sue Chetwin, said the survey research found significant problems in the insurance market, including a high level of complaints and low levels of trust.
Key results from the survey included:
- One in four consumers had experienced a problem with their insurer
- 13% of consumers felt confident insurers could be trusted
- 8% thought insurers always offered fair terms
- 18% felt they fully understood their insurance policy
It also found that those who bought insurance through an adviser or broker were significantly less likely to be satisfied with the service they got compared with those who bought direct from an insurance company.
Chetwin said this difference was most evident among consumers who had bought life insurance, with survey results showing how satisfied customers felt as follows for life insurance advisers versus direct from insurer:
Policy is easy to understand
49% via direct
34% via adviser
44% via direct
28% via adviser
45% via direct
28% via adviser
“Life insurance brokers get paid on commission, which can be as high as 200% of the premium,” said Chetwin. “Commission-based selling comes with a huge risk the broker will put their earnings ahead of what’s right for their customer. The results of our research suggest selling insurance this way is leading to poorer outcomes for consumers.”
Industry Calls For Perspective
Financial Services Council CEO, Richard Klipin, responded to the research noting it was a useful snapshot into consumer views but does not tell a complete story.
“Public trust and confidence is a major part of the success of any sector and through the broader conduct and culture discussion, the insurance sector is focussed on addressing the key issues,” said Klipin.
“These are important issues to address and the industry is already working with the Government and regulators on multiple fronts to do this,” he added, referring to the work currently underway on the Insurance Contract Law Review, the Conduct of Financial Institutions Options Paper, Financial Services Legislation Amendment Act and the FSC’s new Code of Conduct which will help build public trust.
Minister of Commerce and Consumer Affairs, Hon Kris Faafoi, also recently noted that the new regime will give consumers more peace of mind when dealing with financial advisers and increase levels of trust in the sector. (see: Licensing Fees Confirmed, Estimated 10% Drop in Advisers Under FSLAA…).
Fidelity Life CEO, Nadine Tereora, responded too, noting: “We take conduct and culture and the related regulatory changes extremely seriously because we want consumers to have confidence and trust in our industry so that more Kiwis can get the benefits of independent advice and insurance protection.
“Advisers play a vital role in ensuring good customer outcomes and in our experience the vast majority of advisers do a great job. They look after customers for many years, ensuring they have adequate insurance protection as their circumstances change over time, helping them at claims time and improving financial literacy,” she said.
Financial Advice New Zealand stated the findings of the report were “disappointing” for New Zealanders and disappointing for quality advisers who are committed to delivering good outcomes for their clients.
Chief Executive, Katrina Shanks, said the report highlights the importance of seeking quality advice through an adviser who belongs to an Association committed to quality outcomes for New Zealanders.
“Members of Financial Advice New Zealand are committed to professional standards, to ongoing professional development and to improvements across the sector to help build public confidence and trust,” she said.
“Ensuring individuals and families have the right protection in place for the what-ifs in life is crucial for the financial security of New Zealanders. And to achieve this, we need to build public confidence the sector,” Shanks said.
Asteron Life Executive Manager Customer Experience, Catherine Bateman, said its own SME Insurance Index research showed some big differences in attitudes to the Consumer NZ research, particularly when it comes to the value and experience that customers are getting from advisers.
“For example, our report last year on the difference between male and female small business owners showed that although many direct purchasers didn’t see the benefits of using an adviser, those who did go through one reported a high degree of value from them, particularly in terms of knowledge and advice,” she said.
Bateman added they will share results of further research with advisers later this year.
“We’re currently looking at trust towards insurers and advisers as part of our 2019 SME Index and our findings indicate that life insurance customers with advisers are significantly more likely to trust advisers than direct buyers are,” she said.
Click here to view the Consumer NZ report in full.