The Reserve Bank has reported that many insurers are failing to meet their legal obligation to give policyholders information about their financial strength and ability to pay claims.
"The overall level of compliance was found to be well short of the minimum requirements, with 53 per cent of participants assessed as complying at a low or poor level," it said.
The RBNZ is the regulator for the sector.
Less than a quarter of New Zealand insurers were rated as performing “relatively well”.
The RBNZ concerns related to both general insurance providers and life and health insurers.
It believes that revealing the financial strength of insurers will help with market discipline by putting pressure on insurers to invest in increasing their financial strength, and result in weaker insurers charging lower premiums.
But advisers said there was no evidence that financial strength ratings made a difference to premiums. Many rely on their own claims experience with companies.
FSC chief executive Richard Klipin said good conduct and trust were a vital part of insurers’ relationship with their customers. “So the transparency and scrutiny that reports such as this bring are vital,” he said.
“It provides a valuable lens on the New Zealand insurance market and it’s clear that we collectively have work to do in lifting compliance levels with disclosure requirements.
He said his members paid out $1.16 billion in claims last year.
“The outcome of the review really reflects the complexity of compliance for insurers. As an industry we are completely committed to addressing the issues identified through the review,” Klipin said.
“It’s important to note that the compliance issues identified by the Reserve Bank were generally technical in nature and did not represent major structural problems. In fact, the Reserve Bank has explicitly said that they do not represent underlying viability issues with New Zealand insurers.
“That said, our members are now focused on working with the regulator to rectify the specific issues identified, and ensuring that standards improve and compliance obligations are met across the industry.”
RATINGS:
Southern Cross A+ (S&P)
Sovereign A+ (AM Best)
Westpac Life A+ (S&P)
OnePath Life A+ (S&P)
Asteron A+ (S&P)
Cigna A- (AM Best)
Fidelity Life A- (AM Best)
NIB A- (AM Best)
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