Commerce and Consumer Affairs Minister, Hon Kris Faafoi, has released the Terms of Reference (ToR) for a review of New Zealand insurance contract law. The ToR indicates an intention by the Government to tackle a number of discrete issues with insurance contract law in New Zealand that have been the subject of previous reviews but in relation to which reforms have not progressed. The review also aims to modernise New Zealand's insurance contract law and consolidate it into one Act.
The ToR sets out the scope and public consultation process for the review and confirms that the review will be led by the Ministry of Business, Innovation & Employment.
As anticipated in our November Insurance Regulation Update, the review will focus on (among other issues) policyholders' duties of disclosure and the associated remedies for breach of those duties. The review will also consider:
- aspects of conduct regulation that the IMF's Financial Sector Assessment Programme identified as missing in New Zealand statute law; and
- the scope of terms that are defined in the Fair Trading Act 1986 as not "unfair contract terms" and whether those terms could be moved to insurance-specific legislation.
A further issue that the ToR identifies as subject to the review is the fact that "some consumers may find it hard to compare prices and policies". Although the ToR does not elaborate on how this issue will be assessed, it can be speculated that the review may look into whether uniform disclosure requirements should be introduced for insurance products in New Zealand, similar to existing disclosure regimes introduced by regulators overseas. Insurers in Australia, for example, are already subject to uniform disclosure requirements that require them to produce Product Disclosure Statements for insurance products offered to retail customers (similar to the disclosure regime that applies to retail offers of financial products under the New Zealand Financial Markets Conduct Act 2013).
A number of areas are identified as out of scope for the review (due to being subject to separate ongoing reviews or otherwise), such as the prudential regulation of insurers and the regulation of financial advisers.
In terms of the public consultation process, the ToR targets mid 2018 and late 2018 for the release of an Issues Paper and Options Paper respectively, upon which there will be opportunities for public comment. There will also be informal engagement with stakeholders throughout.
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