Commerce and Consumer Affairs Minister Andrew Bayly says New Zealand’s insurance law is “complicated and dated” and needs to be brought into the 21st century.
The Contracts of Insurance Bill had its first reading in Parliament on Thursday after being introduced on Tuesday.
Bayly says insurance law reforms are “long overdue” as some laws are over 100-years old and the National-Act-NZ First government will be modernising the laws to give people better protection and security in the event of a disaster.
“The recent extreme weather events show just how important a well-functioning insurance system is and it’s about time we brought insurance law into the 21st century,” Bayly says.
“A secure insurance market is integral to our financial wellbeing and is part of this coalition government’s mission to rebuild the economy.”
The Contracts of Insurance Bill was drawn as a Member’s Bill promoted by Bayly's predecessor, Labour MP Duncan Webb, in late March.
Bayly said the Contracts of Insurance Bill would make the insurance system simpler and give premium payers peace of mind that “when disaster strikes their insurer will provide quick and fair compensation”.
“We have all heard stories of people being denied compensation because they didn’t realise they had to disclose certain information, or waiting months on end in limbo while they wait for a decision from their insurer. This isn’t fair or right,” he said.
Bayly intends to pass the Bill before the end of 2024 and said he had consulted with the insurance industry in order to make sure the Bill balanced “customer protection with providing certainty for the market”.
“In a cost-of-living crisis, we are acutely aware of the need to keep insurance premiums to a minimum,” he said.
“The Bill makes a really positive change for consumers by shifting the onus of disclosure duties to insurers. Right now, consumers must disclose everything that might be relevant to an insurance policy. But it’s difficult for everyday Kiwis to know what information is relevant. Under this Bill, there will be no more guesswork for consumers. It will be insurers responsibility to ask the right questions, which will reduce insurers’ ability to void cover or refuse to pay claims.”
Bayly says insurers will need to pay customers within a reasonable timeframe and use simple terms in order to make insurance policies easier to understand, calling these “big wins” for consumers.
“This Bill moderates the cost of insurance by maintaining things that are working well. The last thing I want is to introduce risk and uncertainty, which would drive up insurance premiums and ultimately harm everyday Kiwis,” he says.
At the Insurance Council of New Zealand’s annual conference in March, Bayly said the increase in severe weather events means the New Zealand insurance industry “has a more important role to play than ever”.
Bayly says it's clear New Zealand needs insurance security “more than ever” as the country faces down increased frequency and severity of climate change events and natural disasters.
“It’s evident we need to remain adaptable to meeting the evolving needs of kiwis, kiwi businesses and New Zealand itself,” he told conference attendees.
“The insurance industry has a big part to play in that.”
The Insurance Council of New Zealand (ICNZ), the lobby group for general insurers, welcomed the first reading of the Contracts of Insurance Bill, describing the overhaul of the legislation as well overdue.
"This Bill has been long awaited and I congratulate the Minister of Commerce and Consumer Affairs, Andrew Bayly, for his support and commitment to modernise New Zealand’s insurance law and bring it in line with international best practice," the ICNZ's new chief executive Kris Faafoi says.
"The current legislation is widely acknowledged to be outdated, unwieldy and not fit for purpose in today’s world. The new Bill will help tidy up, rationalise and update New Zealand’s insurance law into a single framework to support well-functioning insurance markets for both insurers and consumers."
Faafoi was Commerce and Consumer Affairs Minister during the first term of the previous Labour-led government.
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