The Reserve Bank of New Zealand (RBNZ) has shared an update on its public consultation regarding policyholder security in the country’s insurance legislation.
According to RBNZ, one important purpose of New Zealand’s insurance legislation is to promote a financially sound insurance sector. The consultation asked whether the current legislation gave policyholders the protection they expect.
“Our regulation of insurers is designed to reduce the risk that insurers will fail,” said RBNZ deputy governor Christian Hawkesby. “Regulation requires insurers to monitor the risks they have taken on and encourages them to keep suitable reserves to deal with adverse events. However, we do not operate a zero-failure regime and some risk of insurer failure remains.”
Current regulations require insurers to publish information that helps consumers assess their financial soundness and signals whether they are on the brink of failure.
“Feedback from the consultation has confirmed our view that the financial information insurers are required to publish is broadly appropriate,” Hawkesby said. “However, there is scope to think about ways of presenting this information in ways that make it easier for consumers to understand.”
The consultation also asked whether there should be a policyholder guarantee scheme for New Zealand.
According to RBNZ, members of the insurance industry mostly felt such a scheme would be “costly and unnecessary”. On the other hand, consumers were more open to the idea, but also expressed concerns regarding the scheme’s coverage and how costs would be managed.
“We will be undertaking further analysis before making any decisions on this issue,” RBNZ said.
