Commerce and Consumer Affairs Minister Andrew Bayly has highlighted a suite of insurance reforms aimed at strengthening consumer protections and modernising the industry’s legal framework.
The Contracts of Insurance Bill and the Contracts of Insurance (Repeals and Amendments) Bill, recently passed by Parliament, introduce significant changes to how insurers and policyholders interact.
Bayly stated that the reforms aim to ensure fair treatment for consumers and to clarify responsibilities under insurance contracts.
“A secure insurance market is integral to New Zealand’s economic success. It enables consumers and businesses to access finance and gives them the assurance to grow and invest,” he said.
Among the most notable changes, the legislation shifts the burden of disclosure from consumers to insurers.
Previously, policyholders were required to identify and disclose any information that could influence a “prudent insurer,” a standard many found difficult to interpret.
“Under the outdated existing law, consumers must disclose any information that might influence a ‘prudent insurer’ – a term that is poorly understood by consumers and has led to insurers voiding claims when consumers accidentally or unknowingly fail to disclose information,” Bayly said.
Under the new rules, insurers must ask specific questions, and consumers are required to answer them honestly.
Additional measures include mandating plain language in insurance policies and requiring insurers to settle claims within reasonable timeframes.
Bayly said that these updates aim to reduce disputes and promote transparency between insurers and their customers.
The reforms also address the use of genetic testing information by insurers. Although there is no indication that such data is widely used in New Zealand, the legislation allows the government to regulate its use if necessary.
Bayly said that genetic testing is a valuable, emerging technology that could unlock significant health and productivity benefits. However, there are international examples of insurers limiting cover or increasing premiums based on genetic test results.
He cited Canada and Australia as examples of jurisdictions that have enacted laws or policies restricting insurers’ access to genetic testing information, aligning New Zealand’s approach with international trends.
The Insurance Council of New Zealand (ICNZ) has supported the reforms, describing them as a necessary update to bring consistency and clarity to the country’s insurance laws.
“The new legislation tidies up New Zealand’s mishmash of outdated insurance laws into a single framework to support well-functioning insurance markets. It also brings New Zealand in line with international best practice,” said ICNZ chief executive Kris Faafoi.
The ICNZ also emphasised the importance of a coordinated implementation process and pledged to work closely with regulators to ensure a smooth transition.
“We are focused on getting on with the job and ensuring there is clarity and certainty for consumers and insurers parties for the long term,” Faafoi said.
Insurers have been granted a three-year timeline to adapt their systems and operations to comply with the new requirements.
This transition period reflects the scale of the changes, which will involve significant updates to internal processes.
“Updating their systems and procedures in that time will be a mammoth task while also running their everyday operations and complying with their regulatory obligations,” Faafoi said.
