Insurance Contracts Bill a "marked departure" from status quo

“After the consultation period closes, MBIE will analyse the feedback received and consider any changes that may be required to the Bill. Once the drafting of the Bill is complete, it will be introduced to Parliament and the normal Parliamentary process for the passage of legislation will begin.”

An 81-page exposure draft – or a version released by a government agency as part of the consultation process – was published by MBIE to seek feedback until May 04. Meanwhile a separate select committee process, which takes place post-introduction in Parliament, will provide further opportunities for public submissions.

Described by MBIE as “out of step” with other jurisdictions that have already reformed their laws, the existing New Zealand regime is spread across a mix of case law and different pieces of legislation – including the Marine Insurance Act 1908, the Life Insurance Act 1908, the 1977 and 1985 Insurance Law Reform Act, and the Insurance Intermediaries Act 1994.

“The Bill is intended to reform, consolidate, and modernise existing insurance legislation into one statute,” highlighted New Zealand law firm Bell Gully, which is not only participating in the draft consultation but will also hold an Insurance Contracts Bill webinar.

“It will affect the rights of insurers and insureds under all insurance and reinsurance contracts entered into after its enactment, as well as insurance intermediaries and brokers.”

Read more: Insurance laws allow “patently unfair” policy wording, says lawyer

Meanwhile Lawlink member Hesketh Henry, which said it will review the draft Bill closely, noted: “The draft Bill has been expected since the government agreed to a number of policy changes in November 2019.

“The key policy changes for consumers include reforming the policyholder’s duty of disclosure; removing the existing exemption for insurance contracts from the unfair contract terms provisions in the Fair Trading Act 1986; and imposing an obligation on an insurer to present policy wordings clearly.”

A result of the comprehensive insurance contract law review that began in 2018, the Bill was described by MinterEllisonRuddWatts as a “long-awaited” piece of legislation that should be considered by all insurers, advisers, and policyholders.

“Like many of the participants in the insurance industry, we have watched and waited (and waited some more) for the consultation draft of the Insurance Contracts Bill to be released,” declared the law firm in a post penned by partner Lloyd Kavanagh and solicitor Sarah Jones.

“As the consultation for the Bill points out, similar reforms have already been made in other jurisdictions such as Australia and the UK. This has left New Zealand out of step with overseas markets for some time. The impact of the Bill, especially how they will interact with other reforms currently in the pipeline, will be complex, however, and will require careful consideration.”

The co-authors, who support MBIE’s efforts to conduct a structured and considered review of insurance contract law, added: “Given the profound impacts the reforms will have on all engaged in the insurance sector, whether as insurers, advisers, or policyholders, it is important that readers take the time to consider the impacts, and make submissions to MBIE on the draft Bill, ahead of it being introduced into Parliament.”

Aimed at complementing the Financial Markets (Conduct of Institutions) Amendment Bill, the Insurance Contracts Bill is intended to ultimately promote the “confident and informed” participation of stakeholders in the NZ insurance market and ensure that both insurance contract provisions and insurers’ practices in relation to contracts operate fairly.

“There was widespread agreement that New Zealand’s insurance contract law needed updating,” wrote MBIE in its consultation paper.

“As foreshadowed by the Cabinet policy decisions,” stated law firm Russell McVeagh, “the Bill represents a marked departure from the status quo for insurance contract law in New Zealand with a clear focus on consumer protection.”