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Government review of insurance contract law

March 08, 2018


Partners Jania Baigent, Helen Smith
Senior Associates Rebecca Faull

Financial services regulation

Minister of Commerce and Consumer Affairs, Kris Faafoi, has announced a review of New Zealand’s insurance contract law. The review follows the Minister’s commitment to reform announced last November and recent reforms in the United Kingdom and Australia.

The Minister says that there are significant problems with insurance law in New Zealand which is undermining the effectiveness of our insurance markets. Those comments mean the review will attract a lot of attention, and it is important that you have your say.

Terms of Reference for the review have been released. These outline the scope, process and proposed timeframe.

The review is wide-ranging with issues to be assessed including:

  • Disclosure obligations for policyholders and remedies for non-disclosure;

  • Technical issues previously identified by the Law Commission and insurance industry;

  • Unfair contract terms; and

  • The ability of consumers to find and compare prices and policies.

The review will also cover regulation and supervision of insurers’ conduct. This is in response to the International Monetary Fund’s recent comment that New Zealand has room for improvement in this area.

The Terms of Reference specifically exclude the following areas from review:

  • Underinsurance;

  • Competition issues relating to the structure of insurance markets;

  • Prudential regulation of insurers (which is already being considered by the Reserve Bank in its review of the Insurance (Prudential Supervision Act) Act 2010;

  • Earthquake insurance (already being considered by the Treasury) and accident compensation insurance; and

  • Regulation of financial advisers and the insurance dispute resolution regime.

The review will develop recommendations for legislative change. The focus is to generally modernise New Zealand’s insurance contract law with consolidation of existing insurance-specific legislation into one Act being proposed.

The Ministry of Business, Innovation and Employment is preparing an issues paper for public consultation, due in mid-2018. The issues paper will be an opportunity for interested parties to make submissions on the issues covered by the review and objectives for insurance contract law.

Dates of interest are:

  • Mid-2018: Release of Issues Paper for consultation;

  • Late 2018: Release of an Options Paper for consultation; and

  • Mid 2019: Policy decisions made; to be followed, if warranted, by a legislative process

The Government says there will be engagement with stakeholders throughout, including beyond the formal consultation process. But, the insurance industry in New Zealand affects us all, whether at a personal or commercial level. It is one of the means by which we protect ourselves against risk. This is a significant review and it is important that decision-makers receive a balanced view of the industry and any issues within it. We encourage those within or affected by the insurance industry to participate in the review.

We will be monitoring the review and will report on this again as the review progresses. The issues paper will likely be extensive and there will be limited time in which to respond. Some early consideration of the issues affecting you or your industry is warranted, so that you can respond effectively and within the time provided. If you want to know more or think you might want to make submissions, please get in touch. Members of our expert insurance team would be happy to assist.