Inside Money: NZ insurers get served as regulator begins life-changing process

A campaign for change in Australia's life insurance industry has spurred a closer look into life insurance in New Zealand. Photo / Thinkstock

As the campaign for change in the life insurance industry gathers steam in Australia, New Zealand authorities have begun shoveling coal into the regulatory investigation engine this side of the Tasman.

Last week the Financial Markets Authority (FMA) confirmed it had subpoenaed "the main life insurers" for information regarding a wide range of life insurance products sold over the last four years.

In a statement, Liam Mason, FMA general counsel, said the data - requested under section 25 of the regulator's 2011 establishing legislation - would form "part of an exploratory project into insurance churn and replacement".

(The regulator also used its section 25 powers in its bank KiwiSaver sales investigation, due to report back before year-end.)

Transtasman regulatory buffs will recall report 413 published by the Australian Securities and Investments Commission (ASIC) last October, which fished similar waters.

The FMA trawl might take some time. ASIC's 413, which took over a year to compile, was a two-phase process: "industry roundtables and a survey of 12 insurers", followed by a "targeted surveillance" of advisers involving over 200 case files.

Liam Mason, FMA general counsel, said the data would form "part of an exploratory project into insurance churn and replacement".

New Zealand's regulator has not mentioned an adviser investigation explicitly but Mason's statement drops hints.

"We are at the early stages of discovery into whether there is churning of insurance policies in NZ and what the size of this issue might be," he said in the statement.

"Once we have completed our review we will be contacting providers directly, and this will inform the FMA's future monitoring activities of all sides of the life insurance supply chain."

As well as the impact of product feature changes and commissions, the regulator will also be examining 'soft dollar' benefits such as overseas conferences.

The regulator should be led by its findings. But with ASIC 413, the ensuing Trowbridge report and now the Financial Advisers Act review all pushing in the same direction, it's hard to see this ending up as an endorsement of the current life insurance remuneration system.

At the very least, the FMA should be able to finally serve up some hard data on churn.