IFSO Scheme monetary limit change in effect soon – how it came about
IFSO Scheme monetary limit change in effect soon – how it came about | Insurance Business New Zealand
Insurance News
IFSO Scheme monetary limit change in effect soon – how it came about
New compensation cap effective in September
Insurance News
By
Terry Gangcuangco
The Insurance & Financial Services Ombudsman (IFSO) Scheme has a new applicable monetary limit (AML) that will broaden the scheme’s scope. Here’s a look at how the imminent change, which is taking effect in September, came about.
Initially, the IFSO Scheme wanted to adjust its AML from $200,000 to $500,000 for the lump sum, and from $1,500 to $6,700 for the weekly payment. All amounts have an additional goods and services tax (GST) if GST applies.
When the proposal was put forward, the IFSO Scheme said: “The 2018 review of the IFSO Scheme recommended increasing the lump sum and weekly payment sum of the applicable monetary limit. After the review was completed, other approved schemes and the District Court increased their lump sum limits to $350,000.
“Cabinet recently approved MBIE’s (Ministry of Business, Innovation & Employment) proposal to set a consistent limit of $500,000 for all approved schemes, by regulation, for a lump sum limit of $500,000. As the proposal is expected to be implemented in 2023, by regulation, we have recommended that figure for lump sum payments.
“The 2018 review of the IFSO Scheme recommended increasing the weekly amount to $3,000 relative to a lump sum limit of $350,000. We are proposing a higher amount so that it is in line with a lump sum limit of $500,000 with a mechanism to increase with the CPI (Consumer Price Index).”
Following the first of two consultations on the proposed change, the IFSO Scheme said that while two submissions were in favour of the $500,000 figure, the remainder generally supported the lump sum AML being brought into line with the limit of the other dispute resolution schemes and that a higher amount be instituted by regulation.
Financial Services Complaints Limited, another approved dispute resolution scheme, currently has a $350,000 limit.
As for the weekly AML, it was noted that only one submission was in support of the proposed increase. The IFSO Scheme, however, did not find it acceptable for the weekly sum to remain unchanged since 2015, calling it prejudicial to consumers to maintain the current limit.
In response to stakeholder feedback, the IFSO Scheme revised its proposed compensation cap amounts, to $350,000 and $2,625. These changes, following a second consultation, have since been approved by Minister of Commerce and Consumer Affairs Hon Dr Duncan Webb.
Aside from the AML adjustment, other key changes taking effect next month include the increase in the amount that can be awarded for special inconvenience and the amended process for selecting Commission Members.
According to the IFSO Scheme, the changes primarily reflect law changes; align the scheme’s terms of reference with the other approved dispute resolution schemes’ rules; implement the recommendations made by the last independent public review of the IFSO Scheme; and recognise modernised processes and procedures.
IFSO Scheme Commission Chair Sue Suckling said: “We would like to thank everyone who was involved in the feedback and work required to facilitate these changes. We look forward to seeing these changes implemented, improving the dispute resolution service the IFSO Scheme provides to its participants and their customers.”
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