Since its 2018-19 probes into the conduct and culture of banks and life insurers alongside the Reserve Bank, the Financial Markets Authority (FMA) says 225 issues have been reported to the FMA involving life insurers.
Clare Bolingford, the FMA's Director of Banking and Insurance Conduct, disclosed this figure in a speech at a Financial Services Council (FSC) conference on Wednesday afternoon.
"Since our 2018 review of life insurers’ conduct and culture, many providers have been evaluating their products to ensure they’re fit for purpose, and self-reporting any concerns to us. In that time - almost four years - 225 such issues have been reported to us involving life insurers, many the result of creaking systems and weak controls," Bolingford says.
"Nearly half a million customers have been impacted, and more than $43 million paid in remediation. And that’s just for the one-third of issues whose impacts have been fully assessed."
"It’s worth remembering, when we first reported on remediation in September 2019, insurers that had at least undertaken reviews identified 75,000 customers impacted, with a value of around $1.4 million. Last September we highlighted credit card replacement insurance as a product that has had low or poor value for large numbers of customers, not helped by the way it was sold. The more firms have looked, the more problems they’ve found," says Bolingford.
Last month Cigna Life Insurance admitted to making false and/or misleading representations to customers in proceedings brought by the FMA at the High Court in Wellington.
"When we asked firms to go and check their business for signs of poor practices, we did find - and in fact are still being informed about – multiple issues negatively impacting customers and some unfair treatment. Many of these have now been fixed and customers put right, but many are still being worked through. And I expect more will continue to come to light, particularly in firms that may not yet have properly tested the areas where harms to customers can occur," Bolingford says.
The FMA is yet to disclose the number of conduct and culture issues reported to it by banks, and the level of remediation paid for them, over the past four years.
Bolingford recently spoke to interest.co.nz about the FMA's plans to start regulating the conduct of financial institutions in an episode of our Of Interest podcast.
The FSC is an industry body whose members include life, health, disability and income insurers, fund managers, KiwiSaver and workplace savings schemes including restricted schemes, professional service providers, and technology providers to the financial services sector.
14 Comments
I never understood "life" insurance. Insurance is a service which replaces or fixes something lost or broken, like a household item or a car, it can even replace lost income for businesses, but it cannot, ever replace a life lost. Yes I understand it's a way to get a payment if the main earner in a family dies so that the family doesn't fall into hardship, but that's not the real concern of the insurance company. The insurance companies conjured "life" insurance as another way to make more money.
I had term life insurance when I had a mortgage and dependents (till kids finished education & settled into work). Stopped it years ago when net assets/worth increased.
Also an option for those with lower net worth / assets at times due to lifes vagaries although premium increases are exorbitant for those aged 60+.
To get technical it should be called Life Assurance, (not insurance). For insurance the event may never happen (i.e. a car may never be stolen in its life). However we will all die at some point, that's assured! So the risk being covered is timing, 'the when' we will die, hence Life Assurance.
Not really. Life insurance was one of the earlier forms of insurance. Insurance is just to indemnify the financial impact of loss, not to replace something. In GI that often means replacing something in Life Insurance it means insuring the financial to family. Keep in mind over half of life insurance is living benefits, i.e. benefits that insure loss due to illness/accident as opposed to death.
Plenty of instances where insurance companies delay and deny valid claims causing more harm to the individual. They have deeper pockets and badly written policies designed to serve them and not the customer.
In my own case making a claim on my income protection policy due to health issues they disagreed with their appointed psychiatric professional. When you're already suffering it's difficult to argue your case. A year later I had the case reopened with the help of someone who previously worked in the industry and now specialises in these instances. It was clear that my claim shouldn't have been denied and the insurance company eventually implied they'd honour my claim, and then proceeded to delay and deny. Had to involve lawyers at this point and a further 2 year battle. They begrudgingly paid out with zero accountability when a journalist made contact for a story he was writing about the issue.They really do only care about the money and their impact on their customers health is of no concern. They'll happily virtue signal in their advertising though.
Just to prove you wrong!
I had Life Insurance with Trauma cover through Partners life - Was diagnosed with prostate cancer in May this year. Put in my claim in July and recieved the payment 2 weeks later and was able to use the proceeds to bypass the public wait times. was recovering from surgery in september when I recieved a call from the public system that I was on the list to be seen..
Net result is I shaved about 7 months off the public wait times and prognosis is for a full recovery.
I am certainly not an apologist for insurance companies. They are just another commercial entity trying to make a buck who will use every avenue to expand their customer base and minimise their expenditure, ie insurance pay outs. And I would agree that the complexity of the product and the taking of charges possibly many years before being required to deliver the promised service does create an imbalance of power between provider and consumer. In other words, some statutory controls to level up the playing field is in order. An independent insurance ombudsman (with some teeth) is a good idea.
But to trust our politicians (the least trusted category of the human species) to develop an enveloping blanket of protection against any and all of life's challenges is something to be very sceptical about, The FMA, a relatively recent player is yet another example of some politicians "bright idea" to look after the person in the street at no cost to him or her. A simple nonsense.
The FMA charge eye-watering fees to financial service providers , mainly designed to provide comfort and nourishment for yet another fat bureaucracy...ie themselves.
Of course the charges and fines go straight to the bottom line of the provider's profit & loss, to be paid by? You guessed it,...the muggins consumer! On top of increased bank etc., fees or reduced services, as every individual who has tried to join a managed fund, or term deposit, or purchase of bonds has found, the FMA require a plethora of paperwork to prove you are you, even if you have been a bank customer for many years. This we are told, is to head off those nasty money launderers, who, faced with all the forms, will hold up their hands and promise to "go straight" in future. I shudder to think of the forests cut down to fuel the paper war, the litres of ink expended on home computers, and the hair that is torn out in frustration at all the bureaucratic nonsense.
"Since our 2018 review of life insurers’ conduct and culture, many providers have been evaluating their products to ensure they’re fit for purpose, and self-reporting any concerns to us."
Would you trust an insurer with self-reporting their own flaws? When otherwise they would simply get away with it and rip customers off for millions? I'd be very worried regardless as if they are self reporting several issues, their motivations would have to be driven by either 1./ Full investigation by an authority who can hold them to account or 2./ They are only self-reporting a few issues as a slight of hand to lead away form some of the other core issues that they are making millions from.
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