The insurance sector was faced with the prospect of significant reform to New Zealand’s insurance contract law back in May, when Minister Kris Faafoi announced the kick-off of an overhaul. The review promised to look at the difficult nature of disclosure obligations on insureds, and to update legislation that may have been relevant a century ago, but no longer reflects the realities of the sector in the present day.
The industry provided its submissions to MBIE in July, however since then has been largely left in the dark with no tangible progress being made.
According to experts from across the industry, the review is well overdue and the issues are clear – so why are we not seeing any changes that would be relatively simple to enact?
“I would expect the issue of material non-disclosure to be looked at quite carefully by the committee responsible for the review,” Wynn Williams partner Richard Hern told Insurance Business.
“If you look at Australia, the common law position there has been quite dramatically curtailed, and this has been the case since the mid-80s. In New Zealand, we still have a situation where an insured can get cut off at the knees if it’s established that there was material non-disclosure, either innocent or otherwise. Given both the previous and this government’s focus on consumer law, I would think that this area would warrant particularly close attention.
“They’ve been talking about reform for a long time now and the issue surfaces periodically, but at this stage, nobody is holding their breath,” he explained.
“MBIE and other government organs have likely got their hands full at the moment with a number of other changes to the business landscape, so I expect any significant changes will be some time away.”
Nonetheless, senior solicitor Tim Gunn of Shine Lawyers says immediate legislative change may not even be necessary to enact changes within the industry. The government has only to give an indication that it will make certain changes to the law, and the insurers who write their policies in advance would need to adapt to them immediately.
There is a general acknowledgement that the government has taken on a substantial amount of reviews, and that insurance contract law is not necessarily at the forefront of MBIE’s collective mind – however, there is undoubtedly a large appetite for reform, and the sector remains hopeful that the most pressing issues will be acknowledged and addressed.
“The issue of non-disclosure is an easy one to spot, and it’s one of the key reasons for the review of this area,” Gunn stated.
“There have been multiple reviews on this area of law previously and everyone knows what the issues are, so the government really needs to get on and start making some policy changes. Policies are reviewed annually, and there is an opportunity for them to indicate some changes before the end of the year, which may affect the policies that are written for 2019. But there’s been nothing, and that has gotten quite frustrating.
“Other jurisdictions have made the amendments over the last couple of years, and everyone knows what should happen. It’s not a difficult or complex issue, if you’re not afraid to stand up to the insurance companies.”
Gunn says that the lack of action is especially trying given that the review has been attempting to get off the ground for quite some time, but has been repeatedly set aside. He says insurers now have the opportunity to step forward first by adapting their practices to the changes they know will eventually occur, and this will put them ahead of the game when those amendments are written into law.
“If it’s put aside again after having been reviewed twice before, there should be a great degree of concern over the rationale behind that,” Gunn stated.
“You only have to look at the influx of calls our firm receives whenever the public is made aware of the ins and outs of certain insurance products to know that there is a large appetite for reform. If that’s not met by the government, then I’d really want to know why that was so.
“The fact that the recent reforms in relation to loan sharks will only come into force in a couple of years indicates that although these reviews might be being undertaken now, legislative change is only going to happen well into the future,” he added. “But with this area, it doesn’t necessarily need to be so. All you need to do is give an indication to the market that you’re going to get rid of something, and insurers who write their policies in advance can make amendments without even having to have legislative change to mandate that. There should be a responsible approach taken, and insurers should really take the front foot on this.”
Minister Kris Faafoi stated in May that MBIE has received a lot of feedback around the disclosure issue from the consumer end, and that both sector players and consumer groups are keen to see the legislation updated. He has indicated that industry submissions will be reviewed ‘in due course’ – however, it remains to be seen where the review will ultimately place on the government’s long list of priorities.
