COMPLIANCE NEWS - INSURERS - OCTOBER ISSUE 2018
This month we look at a new code of conduct for the financial services industry, the insurance contract law review by MBIE, and admissions made by global insurers as part of the Australian Royal Commission's inquiry on the insurance, financial services, and banking sectors. We also provide our general update on relevant legislation.
NEW CODE OF CONDUCT FOR FINANCIAL SERVICES INDUSTRY
The Financial Services Council (FSC) launched a new Code of Conduct (Code) which will come into force 1 January 2019. The Code is designed to build the professionalism of the financial services industry by reinforcing the need for good conduct and a strong consumer-focussed culture.
All members of the FSC must comply with the Code. The Code applies to all dealings which could impact the standing of the financial services industry in New Zealand.
The Code, which complements and is supplementary to existing laws and regulations, has nine standards which fall into three core objectives. Specifically, maintaining a principal ethical standard, meeting customer perspective standards, and delivering good customer outcomes.
The Code states that all potential material breaches of the Code are assessed by an independent disciplinary committee. Sanctions range include a reprimand, fines of up to $100,000, and expulsion from the FSC.
The Code will be reviewed by the FSC Board at least every three years.
Please contact us if you have any questions on the Code.
MBIE'S INSURANCE CONTRACT LAW REVIEW
Insurance contract law is currently being reviewed by the Ministry of Business, Innovation and Employment (MBIE). The primary focus of the review includes issues related to the duty of disclosure, unfair contract terms, and conduct issues.
MBIE released and sought submissions from the public on the Issues Paper. The consultation period and submissions on the Issues Paper closed on 13 July 2018. MBIE will use the information provided by the public on the Issues Paper and prepare a report to the Minister of Commerce and Consumer Affairs (the Minister governing the review). After the Minister has considered the issues in the report, MBIE will release an Options Paper. The Options Paper will give another opportunity for the public to engage in the review and submit feedback on its issues.
It is important stakeholders in the insurance industry engage with this law review to ensure that any policy decisions which lead to legislative changes are fair and commercially effective. Please contact us if you have any questions on the review. We will keep you updated on MBIE's progress with the review.
ADMISSIONS FROM INSURERS
A number of admissions have been made by insurers as part of the public hearings resulting from the Australian Royal Commission's inquiry into the alleged misconduct within the financial services, insurance, and banking sectors.
AIA Group acknowledged it had engaged in misconduct by failing to provide notices which meant that customers were unaware that their life insurance had been cancelled for non-payment of premiums. AIA Group admitted to engaging in other instances of misconduct including overcharging premiums, incorrectly calculating pre-disablement income of policyholders making claims, poor customer service, and unclear explanations of products.
AMP acknowledged it engaged in possible misconduct. AMP admitted it engaged in insurance rewriting (a representative recommending a customer cancel one AMP life insurance policy and replace it with another AMP life insurance policy so the representative can collect the maximum upfront commission payable). AMP admitted it engaged in conduct which fell below the community standards and expectations by delaying assessments of insurance claims particularly in relation to claims for total and permanent disability.
The Australian Royal Commission received reports of misconduct from the insurance units of the Commonwealth Bank, Westpac, NAB, and ANZ. IAG reported that it had identified 112 cases of misconduct and 40 instances of conduct which fell below community standards and expectations including systematic problems with its sale processes and the handling of claims.
Review of the Insurance (Prudential Supervision) Act 2010
Further to our comments made in our April Issue, no new information has been released regarding the review of the Insurance (Prudential Supervision) Act 2010 (IPSA). Work on the IPSA has been deferred until the Reserve Bank of New Zealand completes its other initiatives which take priority over this review. We will update you as new information comes to hand.
Financial Services Legislation Amendment Bill
The Financial Services Legislation Amendment Bill (Bill) is currently before the Committee of the Whole House. The Bill is an omnibus Bill which makes amendments to the Financial Markets Conduct Act 2013 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. A number of regulations will need to be made to support the measures in the Bill. If the Committee of the Whole House come back with the recommendation to pass the Bill without amendments, it is likely the Bill will be passed as it is now. Please contact us if you have any questions on the Bill or on how the Bill will impact your business.
Fair Insurance Code
The Insurance Council of New Zealand (ICNZ) is in the process of reviewing the Fair Insurance Code and the submissions received from the public. The ICNZ expects the new Fair Insurance Code will be introduced in 2019. We will update you as new information comes to hand.
Earthquake Commission Act 1993
The Earthquake Commission Amendment Bill (Bill) is currently before the Select Committee. The Bill makes changes to the Earthquake Commission Scheme to simplify and speed up the claims process. Parliament is currently reviewing the submissions received from the public. Any amendments to the Earthquake Commission Act 1993 are expected to come into force on 1 July 2019 after the completion of an independent inquiry of the Earthquake Commission.
We will update you when new information comes to hand after the submissions have been reviewed.
Canterbury Earthquakes Insurance Tribunal Bill
The Canterbury Earthquakes Insurance Tribunal Bill (Bill) is currently before the Select Committee. The Bill intends to establish the Canterbury Earthquakes Insurance Tribunal (Tribunal). The Tribunal will provide speedy, flexible, and cost-effective services to help resolve insurance claims between policyholders and insurers, and insured persons and the Earthquake Commission. Claims must relate to damage to residential buildings, property, or land caused by the series of Canterbury earthquakes which occurred in 2010 and 2011.
The Governance and Administration Committee is seeking public submissionson the Bill. Submissions must been made before 18 October 2018. Please contact us if you would like us to review or prepare any submissions.
The Privacy Bill is currently before the Select Committee. Parliament is currently reviewing the submissions received from the public. We will update you when new information comes to hand after the submissions have been reviewed.
Disclaimer: The information contained in this newsletter is provided for informational purposes only, and should not be construed as legal advice on any matter.