Insurance law set for shake-up

Lianne Dalziel

Better consumer protection, including improved monitoring and enforcement and a single watchdog, are among proposals the Government is considering for the insurance and savings industry.

Commerce Minister Lianne Dalziel, speaking at the Modern Mutuality Seminar in Wellington yesterday, outlined discussion documents on mutual governance and insurance which are among nine due for release next month as part of the Review of Financial Products and Providers.

She said Government and industry groups had identified the need to reform insurance legislation, some of which was nearly 100 years old.

Across the sector there were different requirements and varying levels of consumer protection. Dalziel said the industry already had strong self-regulation but more could be done.

"The options identified for a new insurance regulatory regime seek to reinforce these disciplines, and build on their effectiveness by providing Government with the ability to monitor and, where necessary, enforce compliance - something that is lacking in the present regime".

Vance Arkinstall, chief executive of the Investment Savings and Insurance Association which had contributed to early stages of the review, expected the insurance discussion document would include proposals to streamline the savings industry's disputes resolution process.

At present, there were separate ombudsmen for banks and for specialised insurance and savings product providers.

"We need to have a disputes resolution process that's easily accessible and not confusing. That leads you to the conclusion that there should be one financial services ombudsman and that's an area that certainly needs to be debated and considered," Arkinstall said.

The legislation around various products or aspects of the industry had developed independently over several decades.

"They are all providing a similar service but they are covered by legislation that can be quite markedly different. It makes sense to consider all of these aspects and consider them all at once and try and introduce some legislation that provides consistency across a range of savings options."

Meanwhile, Dalziel said the Government had "a real appreciation" of organisations operating under the mutual structure, which includes building societies, credit unions and some insurers.

"As not-for-profit organisations, mutuals not only play an important part in sustainable economic development, they perform a vital role in contributing to the social fabric of New Zealand."

As well as imposing Companies Act-type requirements on mutuals, as had been done in other jurisdictions, the Government intended to enhance the strengths that the mutual form already provided.

Dalziel said the diverse range of legislation applying to the governance of mutuals meant there were "gaps and inconsistencies" in governance principles.

"Through establishing consistent governance minima, mutuals will be able to compete on an even playing field. It will also mean that consumers will be afforded consistent protection regardless of who they purchase their insurance product from."