The Government has warned that consumers deserve better from life insurers.
This follows the Reserve Bank of New Zealand and Financial Markets Authority voicing their disappointment last week with life insurers’ responses to the joint Conduct and Culture Review (see: Regulators Disappointed With Sector’s Weak Appetite for Change…).
Minister of Commerce and Consumer Affairs, Kris Faafoi, says a number of life insurers still need to lift their game after this underwhelming response to the review.
The review involved the regulators asking 16 life insurers to provide work plans that would demonstrate the steps they would take to improve processes, governance and monitoring of conduct risk.
“Disappointingly, in many cases the responses from some life insurers show slow and inadequate progress, and I share the regulators’ concern,” said Faafoi.
”Many of the plans life insurers provided to the RBNZ and FMA for improving their internal systems were poorly expressed and incomplete.
“Some life insurance companies also appeared to be trying to ‘pass the buck’ to the brokers and advisors they use to sell their products,” he added.
Faafoi noted that although some life insurers have made commitments to address issues and are stepping in the right direction, overall the industry still has work to do.
“I want insurance providers to understand that they remain responsible for the quality and appropriate design of the products they sell…”
“I want insurance providers to understand that they remain responsible for the quality and appropriate design of the products they sell, whether directly or through contracted agents, to ensure those policies fit customers’ needs,” Faafoi said.
He added that the Government had been working to fast-track measures to improve conduct in the financial sector, and will announce action on this shortly.
“We know the wider financial services sector – including both banks and insurers – hasn’t been putting customer interests top of mind. Sales incentives are a big part of the problem,” explained Faafoi.
“Incentives play a useful role in some cases and we don’t want to remove them entirely. But when insurers sell financial products and services, the focus needs to be on the customer and not just on profit.”