The Minister of Commerce and Consumer Affairs Jacqui Dean is remaining non-committal to one of the more urgent recommendations the International Monetary Fund (IMF) made in its recent report on New Zealand’s insurance sector.
The IMF’s Financial Sector Assessment Program released in May suggests “immediate action” be taken to address the fact the way insurers handle their customers’ claims is “effectively unregulated”.
The IMF says the government should review the scope of conduct regulation for insurance, “considering all aspects of the insurance product life cycle”.
It points out there are no explicit requirements for insurers or intermediaries to have policies and processes in place to handle claims or complaints in a “timely and fair manner”.
Asked whether she sees scope to introduce legislation to address this regulatory gap - perhaps through the insurance contracts law reform she has committed to undertaking in 2018 - Dean says: “We are currently in the early stages. We have signalled we want to look into insurance law but are not in the position to state what that would look like.”
Insurance lawyer Andrew Hooker says he hears from around two people a week, unhappy with the time their insurers are taking to address and settle their claims.
One of his customers for example, is still waiting for their car to be repaired, six months after they took it to the panel beaters.
While a Christchurch couple was unsuccessful in their bid to be awarded damages over allegations Tower delayed the settlement of their quake-related claim, a High Court Judge did find Tower guilty of withholding information. This is arguably a claims handling issue.
The Insurance and Financial Services Ombudsman (IFSO) Karen Stevens hasn’t seen a significant number of claims handling-related complaints.
She says: “Some complainants do complain about the way in which their complaint has been handled.
“In most cases, while there may have been either delays or lapses in communication, there are very rarely claims that get as far as the IFSO Scheme which have been handled very poorly.
“In the cases we see, the insurer will usually know about it before it comes here and will have tried to do something about it.”
As for the Financial Markets Authority (FMA), while it doesn’t have the remit to regulate claims handling, this isn’t something that has come to its attention as being problematic.
“I can’t tell you how much of an issue it is,” its director of regulation Liam Mason says.
“The FMA has relatively new powers in the fair dealing space under the Financial Markets Conduct legislation, and we’re just starting to use those and explore where we can use those. But as it’s acknowledged, there are going to be gaps…
“What we’ve been doing so far in the insurance space - which is a new one for us - is largely aimed at sizing where the risks are.”
Mason points out the FMA has seen replacement business, or churn, in the life insurance sector to be a problematic area for example, so is working in this space.
Furthermore, the Insurance Council of New Zealand has a code of conduct. If it decides its members have broken this, it has the ability to fine them up to $100,000 or kick them out of the industry body.
Hooker however points out this code isn’t binding before the law.
Furthermore, only fire and general insurers are part of the ICNZ.
While Stevens doesn’t go so far as to call for claims handling to be legislated, she concludes: “Legislation bringing all insurance regulation and the existing statutes under one new consolidated Act is desirable.”
*This article was first published in our email for paying subscribers early on Monday morning. See here for more details and how to subscribe.
4 Comments
It is disingenuous for Jacqui Dean to claim no real knowledge of insurers including EQC handling claims badly and tardily, the shear number of court cases in Christchurch and the total debacle of grossly inadequate repairs undertake by EQC if not a Pyramid in the dessert for all to see than Jacqui Dean is blind & Deaf. There is significant legislation in the US on insurance claims handling, some draconian,to illustrate the way the industry acts and which could be a basis for NZ legislation. Failure to act will simply confirm that Government is in the pocket of Large Corporates.
I agree her claims are dishonest and the Office of the Auditor General will have a large volume of negative feedback about EQC. If she did her job instead of lying (which is a huge insult to everyone who's had to deal with insurance problems in Christchurch) then maybe she would be in touch with reality.
The stance is typical. As with so many other issues in NZ. Housing crisis for example. Government tends to first deny, defer, defend, decline. Did government ministers get their training from inside insurer claims depts.?
Insurance companies are 'public interest entities'. That higher-standard obliges the Government to act with a greater duty in assisting insured consumers who trusted their insurer to meet its promises that they previously paid for with premiums calculated at the time of application to be based on a future chance of a claim arising. Funny then, after the insurer has received premiums based on actuarially calculated and well researched claims incidence probabilities, that it then enters into denial of claim practices.
The Government has allowed insurers to abuse that position. The IMF recognize consumers are exposed. The Government has admitted it does not have the necessary expertise or experience to monitor insurance company practices. More so, the industry has long recognized this and so holds a supreme advantage over its consumer policyholders and the Government. The industry has "captured" the Government.
But here is the expose !! Some industry practices are unlawful to the extent of being a crime. Knowing that the Government is willfully ignoring these malpractices. Labelling them as unfair or bad behavior instead of fraudulent. But here is the joke !! The brokers and sales advisers also ignore these practices, and don't believe it when pointed out while they collect their commissions. The sorry state of affairs is that consumers do not perceive it until its too late. They simply trust the industry and that is why the industry has a fiduciary duty (fact-based) to act and protect policyholders. But instead it treats consumer policyholders as unsecured low ranking creditors who can be abused for the chance for shareholders to profit again.
This government is all for the corporates & all against its people's rights. Why else after 7 years , does the shameful and unlawful practices inflicted on EQ claimants continue to worsen under their watch. In fact it was EQC that became the pathfinder for the insurers with the denial of the as new rights claimants were entitled to. Now that these makeshift & non compliant repairs are starting to surface, this government, through EQC, will continue to be complicit with the insurers, in order to jettison any responsibility. Trouble is the useless & weaki parliamentary opposition allows this to go unchallenged, which in my view, makes them just as complicit.
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