A maximum fine of $100,000 has been agreed by members of the Insurance Council of New Zealand (ICNZ) as a suitable punishment to impose on fellow members for unresolved significant breaches of the Fair Insurance Code.
Members who commit such breaches will first be investigated by a Code Compliance Committee made up of mostly independent people.
If a solution still cannot be reached, the member will be reported to the ICNZ board where they will face being fined up to the newly agreed amount of $100,000 as well as a reprimand or possible expulsion from the Council.
ICNZ CEO Tim Grafton said the move formed part of the Council’s commitment to higher standards of service in all their dealings, which included meeting minimum timeframes for communicating at claim time and acting reasonably when faced with the non-disclosure of relevant information by the insured.
“This gives the new Code the necessary teeth to function as an effective self-regulatory regime,” he said.
Following its release in February, the revised Code was criticised as being created to stave off legislation of insurance activity.
Insurance litigation specialist Andrew Hooker had also denounced it as ‘toothless’, and claimed that insurers had denied that their membership of the Council, and their agreement to abide by its Code, created any obligation or duty that was enforceable against them at law.
At the time, Grafton had strongly defended the changes saying the Code went much further than other Codes he knew of.
In its statement released today, ICNZ said it was actually a rare event that things went wrong, pointing out that 96% of claims were accepted by insurers in the last five years nationwide with only a small number reaching dispute resolution schemes such as the Insurance and Savings Ombudsman (ISO) or Financial Services Complaints Limited (FSCL).
From 1 January 2016 when the new Code comes into effect, if the dispute resolution scheme fails to resolve the complaint through its processes, it will report the breach to the Council who will then impose its own new processes.
“The Insurance Council will establish a Code Compliance Committee to investigate unresolved significant breaches and to work with members to put those breaches right,” Grafton said.
“I congratulate our members on formalising the high standards they place on themselves through the revised Code standards, which are a significant advancement on the current Code, and by supporting those standards with an appropriate and robust process in the rare event if things go wrong.”
Leanne Curtis, the spokesperson for Christchurch community group CanCERN, which filed a submission regarding the revision of the Code, said while it was great to see more weight being added with the introduction of the fine, the devil was still in the detail.
“What constitutes a breach? Who judges? ICNZ effectively work on behalf of the insurer members so it puts them in an odd position to then be judge and jury as well,” she said.
