Insurance Law Reform announced
On 6 March 2018 the long-expected Insurance Contract Law review finally broke cover from the New Zealand Parliament.
The review is going to take in a wide range of issues, some of which may attract controversy in the industry. The main issues highlighted by MBIE (the lead agency, NZ’s Ministry of Business, Innovation & Employment) include:
- Avoidance for breach of Material Non-disclosure obligations.
- Technical issues previously identified by the Law Commission and insurance industry.
- “Regulatory gaps” in NZ regulation of insurers’ conduct – this is driven off recent IMF reviews of New Zealand and will likely be closely bound up in consumer-protection issues.
- The scope of insurance terms defined to be not “unfair contract terms” under the Fair Trading Act as amended since 2015.
- Consumers’ ability to find and compare prices and policies – this takes up a Consumer NZ issue about insurers not willingly supplying information about their premiums and rates to enable easy online shopping around.
- Possibly also the insolvent defendant’s insurance charge and Steigrad case problems under Part 3 of the Law Reform Act 1936.
The MBIE press release/terms does not mince words on the state of New Zealand’s insurance law, describing it as “antiquated and fragmented”. It is hard to disagree with that, especially some aspects of the Marine Insurance Act and Life Insurance Act, both of which trace to 19th Century English parliamentary precedents. However, the review does focus on statute law rather than the lively and modern case-law on insurance issues that is constantly evolving.
MBIE officials are going to look at all insurance business, life as well as liability, fire & general. As part of that, some very old Law Commission reports will be dusted off, one specifically on life cover and one on a miscellany of insurance law problems.
They will be examining the UK and Australian insurance statutes for comparison. We may end up with something like the UK Insurance Act 2015, or the Australian Insurance Contracts Act of 1984, or something bespoke and in between. I expect that the more recent UK position will emerge in front for reform benchmarking. Either way, we can expect a stronger consumer focus to come out of the review.
The revisiting of whether insurance contracts contain “unfair contract terms” is bound to be hotly contested. This is an interesting one, given the Commerce Commission is now making active use of those new powers in other industries, and doesn’t tend to like carve-outs from its special remit.
What is not included in the review
What is just as useful is a clear list of what is out of scope and won’t be entertained by MBIE:
- market competition issues, given that our Commerce Commission as competition law regulator has picked this over pretty thoroughly in the IAG/Lumley and Vero/Tower merger clearance decisions.
- prudential supervision of insurers, given the separate and now rather drawn-out Reserve Bank of NZ review of the Insurance Prudential Supervision Act 2010.
- EQC and ACC issues, with the former already in the throes of massive review and political upheaval.
- regulation of financial advisers, given impending Financial Services/Financial Advisors law change already before a Parliamentary Select Committee.
- underinsurance – for instance whether consumers are under-estimating the level of cover needed under sum-insured home insurance policies (a perennial topic for the Insurance Council of NZ and an important consideration for future insurance needs, but it appears it has been put in the ‘too hard’ bucket).
The timeframe is leisurely, with nothing much by way of a detailed Issues Paper expected from MBIE until the middle of the year, then further consultation, refinement and potential legislation in 2019.
But that is probably a wise move by the government officials, given a number of other complex Financial Services legislation, EQC Review terms of reference, IPSA review and reform projects currently on the run.
The proposed process for the review is as follows:
- Mid 2018: Release of an Issues Paper for consultation
- Late 2018: Release of an Options Paper for consultation
- Mid 2019: Policy decisions made; to be followed, if warranted by a legislative process.
The review of insurance contract law terms of reference can be found here.
Contact me if you would like advice on the Review or submissions to MBIE.
For more detail on Gary’s experience in Insurance Law click here.