New Zealand has modernised its insurance legislation with the passing yesterday of the Contracts of Insurance Bill and the Contracts of Insurance (Repeals and Amendments) Bill, providing consumers with significant new safeguards.
The modernised insurance law will provide Kiwis with confidence that they will be treated fairly by insurance providers, Commerce and Consumer Affairs Minister Andrew Bayly said in a statement.
“A secure insurance market is integral to New Zealand’s economic success. It enables consumers and businesses to access finance and gives them the assurance to grow and invest,” Mr Bayly said.
He added, “Importantly, consumers will no longer have to rack their brains and guess what information is relevant to their insurance policy.
“Under the outdated existing law, consumers must disclose any information that might influence a ‘prudent insurer’ — a term that is poorly understood by consumers and has led to insurers voiding claims when consumers accidentally or unknowingly fail to disclose information.
“Now, the onus is on insurers to ask the right questions and consumers must simply provide honest answers.
“This and other changes, such as requirements for insurers to write policies in plain language and pay claims within a reasonable time, improves the fairness and clarity of our insurance law.
“Following select committee submissions, the Bill has been updated to safeguard Kiwis’ access to life and health insurance if they have taken a genetic test.
“Genetic testing is a valuable, emerging technology that can unlock significant health and productivity benefits. However, there are international examples of insurers limiting cover, or increasing premiums, due to genetic testing results.
“While we don’t believe this is happening regularly in New Zealand now, the Bill includes provisions which mean the Government can, if needed in the future, regulate the use of genetic testing results by insurers.
ICNZ’s response
Mr Kris Faafoi, chief executive of the Insurance Council of New Zealand (ICNZ), said, "We welcome the passing of the Contracts of Insurance Bill and strengthen New Zealand’s financial wellbeing. It’s long overdue and will benefit consumers and insurers.
"The new legislation tidies up New Zealand’s mishmash of outdated insurance laws into a single framework to support well-functioning insurance markets. It also brings New Zealand in line with international best practice.”
Until the modernised legislation takes effect, insurance contracts are governed by various existing Acts and case law. Some of the Acts are over 100 years old.
Mr Faafoi said, "The legislation strikes a balance between strengthening protections for consumers while promoting fairness, certainty and sustainability in the insurance sector.
Still a lot to do
"We know there’s still a lot to do as the insurance industry works toward putting in place the changes required under the legislation.
"Insurers have up to three years before the legislation comes into effect and updating their systems and procedures in that time will be a mammoth task while also running their everyday operations and complying with their regulatory obligations.
"We will work closely with the government and regulators to ensure the new legislation and other regulatory reforms the industry is facing are done in a coordinated way with realistic timeframes that benefit both consumers and the industry as a whole.
"We are focused on getting on with the job and ensuring there is clarity and certainty for consumers and insurers parties for the long term. A sound and sustainable insurance market is essential to building a stronger economy and supporting the financial and economic wellbeing of New Zealanders."