“Creaking systems and weak controls,” are some of the underlying problems that saw more than 200 life insurance issues reported to the FMA during the last four years.
Speaking at the FSC’s 2022 conference at Auckland’s Cordis hotel, the FMA’s Director of Banking and Insurance, Clare Bolingford, said that since its 2018 review of life insurers’ conduct and culture, providers have been evaluating their products to ensure they’re fit for purpose and self-reporting their concerns to the regulator.
Bolingford said 225 issues have been brought to the attention of the FMA during the past four years. Many of the issues, she said, were the result of “…creaking systems and weak controls”.
“Nearly half a million customers have been impacted, and more than $43 million paid in remediation,” said Bolingford. “And that’s just for the one-third of issues whose impacts have been fully assessed.”
When the regulator first reported on remediation in September 2019, insurers that had undertaken reviews identified 75,000 customers who had been impacted, with a value of around $1.4 million.
“We’ve recently taken action against one life insurer as a result of issues caused by customers not having the right information, or having decisions made for them that weren’t well communicated,” said Bolingford.
We’ve recently taken action against one life insurer…
While acknowledging the work performed by insurers to identify problems, Bolingford said a more fundamental shift is needed to “…bring customer fairness into every aspect of decision-making”.
“Life and health insurance are long term products, which many people keep on buying for decades – often with the same provider – unquestioningly and faithfully,” she said.
“But sadly, some customers only find out there are issues with their cover at claim time – which is too late. That’s why it’s so important features and exclusions are properly understood, as well as how premiums are set.”
On the matter of client consultations with advisers, Bolingford said consumers should not be subjected to unfair pressure or tactics that causes them to make a rushed decision.
“It means helping them understand how financial products work, ensuring they know about exclusions, or what could happen if they don’t disclose all relevant information,” she said.
“It also means giving them the confidence that financial institutions and their intermediaries have the same principles and guidelines in mind, and are actively supporting their financial wellbeing.”
Bolingford pointed to research published by the FSC that found 62% of Kiwis have no life insurance, with some of those surveyed saying it’s a low priority for them, and others having a lack of trust in insurance companies.
“There is the risk consumers don’t have good access to quality advice,” she said.
“Put simply, ‘treating consumers fairly’ means equipping staff and advisers with the right information to enable good conversations, but also ensuring it’s done with the consumer’s interests at heart.
Three out of ten of your customers aren’t satisfied…
“That’s one reason we’re working so hard to get our intermediated distribution guidance right – to ensure providers and their intermediaries are all behaving in a way that’s consistent with the fair conduct principle. And we will continue to engage with industry to focus on how to most effectively embed the regime over the next 18 months.”
A survey carried out by the FMA on consumer behaviours and attitudes towards financial services found that 31% of people are confident in knowing what to do if they experienced unfair treatment. While 70% of insurance consumers were satisfied with their insurer.
“Three out of ten of your customers aren’t satisfied,” said Bolingford. “It’s great that seven out of ten are, but how do we get the other three out of ten over the line? In a product sold to hundreds of thousands, if not millions of people, that’s a lot of people who aren’t satisfied.”