Insurance Law Reform announcedOn 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.
What is not included in the reviewWhat 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).
TimeframeThe 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.
Insurance Law Reform announced – well overdue, but likely to be controversial