The Reserve Bank has called for increased effort from the industry in building public confidence in the insurance sector, warning it must evolve in line with increased public expectations and changing risks.
Through the Insurance (Prudential Supervision) Act, the Reserve Bank is tasked with maintaining industry soundness and public confidence in the insurance sector.
In a speech to the Insurance Council of New Zealand, RBNZ Governor Adrian Orr, said “The insurance sector is part of the ecosystem that society relies heavily on to both mitigate risks and/or transfer the risk-burden to those best able to manage it.
“Customer expectations of ‘good outcomes’ from insurance are evolving, and there is a heightened awareness across the financial sector as a whole of the importance of good business conduct,” said Orr.
He added that risks also evolve and insurers need to manage these risks facing the sector, such as climate change leading to more frequent insurance events.
Noting the recent regulator reviews that highlighted significant shortcomings, the Reserve Bank stated that now is the time for the insurance sector to review and improve their conduct and culture, and innovate in their business models.
“The public is demanding that both insurers and regulators play their part in providing greater confidence in the insurance sector.”
“The public is demanding that both insurers and regulators play their part in providing greater confidence in the insurance sector,” Orr said.
“The Reserve Bank will prioritise insurance policy and supervision reviews in 2020 and beyond, and enable individuals and firms to actively participate in shaping the industry’s future.”
Referring to the Life Insurer Conduct and Culture review, Orr said, “We strongly believe that all insurers – including health and general insurance – should learn from the review and its findings.”
He said the Reserve Bank has subsequently written to the boards of general insurers setting out the Bank’s expectations that they will review the culture and governance within their own firms.