by Susan Edmunds
The Government has missed its chance to address concerns raised by the International Monetary Fund about New Zealand’s insurance industry, one commentator says.
In its recent Financial Sector Stability Assessment of this country, the IMF pointed out concerns in the insurance sector, including broker commissions, regulation of claims-handling and a lack of insurance-specific expertise at the Financial Markets Authority.
Insurance industry commentator David Whyte said regulators had a chance to address that with the rewrite of the Financial Advisers Act.
“It has long been a bone of contention that Reserve Bank only oversees capital management and solvency issues relating to licensees, and that while the Government has been diligent in addressing intermediary conduct and behaviour, no such corresponding framework has been contemplated for product providers," he said.
"In essence, the practices of insurance companies are self-regulated, and while many are familiar with the activities of the FMA with regard to adviser misconduct, insurance product providers operate in an environment with no co-ordinated legislative or regulatory framework equivalent to the FAA 2008 – or the revised version proposed in the recent Exposure Draft.
"This is particularly annoying - acknowledged by many non-product provider commentators - as many aspects that trouble impacted stakeholders originate from product providers in their never-ending quest for market share,” he said.
Whyte said the working group to develop the code of conduct for financial advisers was another opportunity for something to be done.
But there is no one with an insurance background among the nine members.
“So the platitudes and schmooze from the politicians indicating support for the IMF findings are immediately abandoned in the face of a practical opportunity to address the IMF concerns.
"The statistics recently published by the FSC indicate that Kiwis are paying $2.42 billion in annual premiums, yet the Government has decided that it is not suitable to have industry-experienced resources allocated to the development of a suitable Code of Conduct governing the behaviour of the largest distribution channel involved in creating this revenue.
"In complete rejection of the IMF recommendations, the Code Committee consists of individuals – competent and able in their own areas, I’m sure – who have no first-hand professional experience in a complex industry that provides for the financial security of consumers in the face of natural disasters, illness, or death. Eye-watering, breath-taking – and completely irresponsible.”
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