Who do risk advisers work for?

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Legislation to be introduced to Parliament next month will tie financial advisers more closely to insurers.

Thursday, February 7th 2008, 6:47AM

by Rob Hosking

One of the most significant is likely to be the question of whether financial advisers are acting for specific insurers when they sell insurance.

The legal uncertainty around that area has caused a number of problems, says the Insurance and Savings Ombudsman Karen Stevens (pictured).

"The message we've been trying to give in a number of our decisions is that consumers don't realise the current state of play is that the adviser is the broker of the insured, not the insurer.

"That can cause a lot of problems when the adviser does something the insured person doesn't like."

Officials had at one point suggested the current lack of clarity be resolved by making the adviser the broker for the insured.

"We got quite upset about that, we didn't' think it would resolve the current problems at all."

Stevens is at pains to praise advisers who are going out of their way to make the current lack of clarity in the law clearer.

"Some advisers are extremely good, they provide good information about who they are dealing with, and what the client is entitled to. But there are people working in the industry who are less than clear."

The other main area the bill will address is disclosure of relevant information by the client.

Dalziel says that in some cases advisers are not asking the right questions: the consumer then finds, at claim time, they do not have as much cover as they thought they did.

The law change, she says, "will provide fairer outcomes for those who innocently fail to tell their insurer something -information that a reasonable person in the circumstances would not have realised was required - from having their insurance policy avoided."

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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