Committee backs major shake-up of NZ insurance laws
Committee backs major shake-up of NZ insurance laws | Insurance Business New Zealand
Insurance News
Committee backs major shake-up of NZ insurance laws
Key amendments shared to help reshape insurance landscape
Insurance News
By
Roxanne Libatique
New Zealand’s Finance and Expenditure Committee has recommended that the Contracts of Insurance Bill move forward, marking significant progress in the effort to modernise the country’s insurance regulations.
The committee, which reviewed the bill, proposed several key amendments aimed at reshaping the insurance landscape.
Government officials expect the bill to be passed by the end of 2024, bringing New Zealand’s insurance laws closer in line with international norms while introducing enhanced consumer protections.
One key issue involved the treatment of dishonest disclosures by policyholders. The majority endorsed treating dishonesty as a lack of reasonable care rather than outright fraud, a position opposed by some members.
Another important amendment clarified that insurers are allowed reasonable time to gather information when processing claims, not just to make payment decisions.
Additionally, there was debate about the regulation of genetic testing, with the majority opting for a more lenient stance.
Overhauling insurance legislation
The Contracts of Insurance Bill seeks to replace and update older statutes, including the Life Insurance Act 1908 and the Insurance Law Reform Acts of 1977 and 1985.
Strengthening consumer rights and contract transparency
At the heart of the bill are several provisions focused on enhancing consumer protections.
For example, the legislation formally sets out a policyholder’s duty to provide accurate and relevant information to insurers while establishing clearer remedies for cases of misrepresentation.
The bill also introduces standards for insurance contract terms, making it easier for consumers to understand and compare policies.
In a previous statement, Commerce and Consumer Affairs Minister Andrew Bayly underscored the importance of these reforms, describing New Zealand’s insurance laws as outdated and complex, with some provisions already over 100 years old.
“It’s about time we brought insurance law into the 21st century,” he said.
He also highlighted how the bill addresses issues related to claims processing, aiming to reduce delays that have long frustrated policyholders.
“We have all heard stories of people being denied compensation because they didn’t realise they had to disclose certain information, or waiting months on end in limbo while they wait for a decision from their insurer. This isn’t fair or right,” he said.
While the bill does not outright ban the use of genetic information in underwriting decisions, it gives the government the authority to regulate this area. This regulatory power allows for flexibility as the insurance landscape evolves, though it raises complex questions for insurers.
Clarifying the role of intermediaries and exemptions for reinsurance
The bill also defines the responsibilities of insurance intermediaries, ensuring that those receiving indirect payments from insurers are subject to regulation.
Additionally, reinsurance contracts will remain outside the bill’s scope, allowing for greater flexibility in how commercial parties choose the legal framework for such agreements.
Claims handling and “reasonable time” provisions
To address concerns about delays in claim settlements, the bill includes an implied term requiring insurers to process claims within a “reasonable time.”
This time frame includes the period necessary for gathering information and assessing the claim, reducing uncertainty for policyholders while balancing operational pressures on insurers to expedite claims processing.
ICNZ backs the bill’s modernisation efforts
The Insurance Council of New Zealand (ICNZ) has expressed support for the first reading of the bill.
However, Faafoi also emphasised the importance of giving the insurance industry adequate time to adjust to the changes.
The bill allows for up to three years for insurers to fully comply with the new rules, which Faafoi said is essential to ensure a smooth transition.
Preparing for regulatory changes
As the Contracts of Insurance Bill advances, insurance providers will need to prepare for significant changes. This includes:
reviewing existing contracts to ensure compliance with new consumer protection measures
preparing for potential regulations on the use of genetic data
adjusting claims processing procedures to meet the new “reasonable time” requirements
The bill will eventually be divided into two separate pieces of legislation: the primary Contracts of Insurance Bill, which addresses key reforms, and a secondary Contracts of Insurance (Repeals and Amendments) Bill, which focuses on updating or repealing older laws.
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!
