New Zealand’s Finance and Expenditure Committee has recommended that the Contracts of Insurance Bill move forward, marking significant progress in the effort to modernise the country’s insurance regulations.
The committee, which reviewed the bill, proposed several key amendments aimed at reshaping the insurance landscape.
Government officials expect the bill to be passed by the end of 2024, bringing New Zealand’s insurance laws closer in line with international norms while introducing enhanced consumer protections.
The committee’s report identified three main areas where members differed.
One key issue involved the treatment of dishonest disclosures by policyholders. The majority endorsed treating dishonesty as a lack of reasonable care rather than outright fraud, a position opposed by some members.
Another important amendment clarified that insurers are allowed reasonable time to gather information when processing claims, not just to make payment decisions.
Additionally, there was debate about the regulation of genetic testing, with the majority opting for a more lenient stance.
The Contracts of Insurance Bill seeks to replace and update older statutes, including the Life Insurance Act 1908 and the Insurance Law Reform Acts of 1977 and 1985.
This effort is designed to streamline insurance laws and align them more closely with those of other countries like Australia and the UK. By doing so, the government hopes to create a more efficient and transparent legal framework for insurers and policyholders alike.
At the heart of the bill are several provisions focused on enhancing consumer protections.
For example, the legislation formally sets out a policyholder’s duty to provide accurate and relevant information to insurers while establishing clearer remedies for cases of misrepresentation.
The bill also introduces standards for insurance contract terms, making it easier for consumers to understand and compare policies.
In a previous statement, Commerce and Consumer Affairs Minister Andrew Bayly underscored the importance of these reforms, describing New Zealand’s insurance laws as outdated and complex, with some provisions already over 100 years old.
“It’s about time we brought insurance law into the 21st century,” he said.
He also highlighted how the bill addresses issues related to claims processing, aiming to reduce delays that have long frustrated policyholders.
“We have all heard stories of people being denied compensation because they didn’t realise they had to disclose certain information, or waiting months on end in limbo while they wait for a decision from their insurer. This isn’t fair or right,” he said.
One of the most debated aspects of the bill is how genetic testing data should be treated in health and life insurance.
While the bill does not outright ban the use of genetic information in underwriting decisions, it gives the government the authority to regulate this area. This regulatory power allows for flexibility as the insurance landscape evolves, though it raises complex questions for insurers.
The bill also defines the responsibilities of insurance intermediaries, ensuring that those receiving indirect payments from insurers are subject to regulation.
Additionally, reinsurance contracts will remain outside the bill’s scope, allowing for greater flexibility in how commercial parties choose the legal framework for such agreements.
To address concerns about delays in claim settlements, the bill includes an implied term requiring insurers to process claims within a “reasonable time.”
This time frame includes the period necessary for gathering information and assessing the claim, reducing uncertainty for policyholders while balancing operational pressures on insurers to expedite claims processing.
The Insurance Council of New Zealand (ICNZ) has expressed support for the first reading of the bill.
ICNZ chief executive Kris Faafoi said that the reforms are long overdue, explaining that New Zealand’s insurance laws are outdated and no longer fits the needs of today’s market – and the new bill will help modernise the legal framework and ensure it better serves both insurers and consumers.
However, Faafoi also emphasised the importance of giving the insurance industry adequate time to adjust to the changes.
The bill allows for up to three years for insurers to fully comply with the new rules, which Faafoi said is essential to ensure a smooth transition.
As the Contracts of Insurance Bill advances, insurance providers will need to prepare for significant changes. This includes:
The bill will eventually be divided into two separate pieces of legislation: the primary Contracts of Insurance Bill, which addresses key reforms, and a secondary Contracts of Insurance (Repeals and Amendments) Bill, which focuses on updating or repealing older laws.
