Insurance disputes in New Zealand are on the rise, with the Insurance & Financial Services Ombudsman (IFSO) Scheme recording more consumer complaints and formal investigations than in previous years.
According to ombudsman Karen Stevens, this increase reflects both a growing awareness of the service and continued confusion around insurance policy terms.
“For years and years, we would do around 3,000 complaints a year and 300 investigations. By the end of this financial year, we’ll be over 500 investigations – it’s gone way up,” she said, as reported by RNZ.
One of the most frequent issues involves policyholders assuming comprehensive cover simply because they’ve paid their premiums. Many remain unaware of specific policy limitations and exclusions until a claim is declined.
Policy exclusions remain a common source of confusion. Stevens pointed to a recent travel insurance case where a trip cancellation due to a relative’s illness resulted in a reduced payout.
The claimant’s mother had been in a care facility during the previous year, triggering a clause that capped reimbursement at $1,000 per adult.
“She said, ‘Oh, but there was nothing wrong with her, until she got pneumonia in hospital.’ Well, that’s fine, but the policy had an exclusion that actually had nothing to do with her wellness or anything else at the time,” Stevens said.
Unreported vehicle modifications continue to create claim challenges as well. Policies often require prior disclosure of any changes that could affect underwriting decisions. If not declared, such modifications can lead to denied claims or cancelled coverage under New Zealand’s disclosure laws.
Rebecca Styles, insurance specialist at Consumer NZ, highlighted other scenarios that can lead to claim issues.
For example, if a vehicle is normally parked in a garage but is later kept on the street without notifying the insurer, that change could be treated as a material risk factor.
“Where you park your car is considered a ‘risk factor,’ so that would be taken into account, when pricing your policy – you usually park in a garage, but moved house and now park on the street,” she said, as reported by RNZ. “While I haven’t come across instances of an insurer declining a claim because of this, in the policy, there is a requirement to let the insurer know.”
Similarly, insurers may decline claims or avoid policies if vehicles are used for rideshare services such as Uber or for food delivery without appropriate notification. Some policies explicitly exclude commercial use unless prior arrangements have been made.
Missed premium payments also pose a risk. Styles referenced examples where missing a payment may trigger a cancellation notice, which – if unaddressed – can terminate the policy entirely.
Stevens also drew attention to clauses requiring “reasonable care.” Leaving a car unlocked or valuables unattended, even briefly, can result in a denied claim.
In response to these issues, the IFSO Scheme is promoting a more proactive role for insurance brokers.
In light of recent storms and flooding events across New Zealand, including Wellington and the South Island, Stevens is encouraging brokers to proactively guide clients through post-disaster claims processes.
Key recommendations include ensuring clients document all damage thoroughly – preferably with photos and receipts – before beginning clean-up or repairs.
Stevens also urged brokers to ensure clients understand their policy types – whether home cover is full replacement or sum insured, and whether contents are reimbursed at depreciated or replacement value.
