She spoke at the Financial Services Council conference this week.
She said to address conduct concerns in the insurance sector, there needed to be regulated, drop-dead things that insurers had to make visible.
“One is the value proposition to your longest-held customer and the other is how you look after your lowest-paid employee,” she said.
Insurers were focused on new business and the people who were already on the books were left to pay the cost of the business while it “ran around and got kudos” and bonuses from attractive new customers.
They should also have to show what structures were available to support people to grow and have careers within the company, to make the right decisions and speak up where necessary.
Ballantyne said conduct concerns popped up in the industry every few years and such bottom lines were needed to stop it happening again. “It’s always good people and good companies but somehow they end up going the wrong way… If you have to air your dirty laundry publicly you clean it up pretty quickly.”
She said New Zealand had a culture of short-termism, and customers wanted things that were quick and easy, without having to deal with any details. “Pars of the industry have pandered to that rather than educating them out of it.”
New Zealand’s industry had too many companies where leadership tenure was short and the in-depth knowledge of customers’ journey was not there. “There are deep chains of command where the people on top haven’t talked to the customer for 150 years, if ever. People are driven by shareholder returns, by career outcomes, profits, bonuses. Long-term promises and short-term targets, that’s how we end up with conduct problems.”
But she said it would be important for the industry that such issues in New Zealand were dealt with without a Royal Commission of Inquiry, like Australia’s.
That destroyed consumer confidence and reinforced to people who were reluctant to engage that staying away was the right thing to do, she said.
“Fixing the problems without completely destroying consumer confidence is a really important part of the role our regulators play.”
But she said the good work the industry was doing would be seen because of the extra scrutiny on the sector.
Reserve Bank governor Adrian Orr, part of the same panel discussion, agreed it was an important balance to strike. He said part of his initial reluctance to commit to such an inquiry was because it would “destroy the industry on behalf of supporting the industry”.
The Reserve Bank and FMA are conducting an inquiry into life insurer and bank conduct.
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