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Insurance parties seek revisions to Contracts of Insurance Bill to ensure more clarity and confidence across the board

Insurance / news
Insurance parties seek revisions to Contracts of Insurance Bill to ensure more clarity and confidence across the board
Andrew Bayly.

Members of the insurance industry have told a parliamentary select committee that a number of changes need to be made to the recently announced Contracts of Insurance Bill before it becomes law.

A public hearing on the Contracts of Insurance Bill was held before the Finance and Expenditure Committee on Wednesday. 

Representatives from the Insurance Brokers Association (IBANZ), Financial Advice NZ, general insurer IAG and Against Genetic Discrimination Aotearoa appeared to discuss their submissions.

Andrew Bayly, the Minister of Commerce and Consumer Affairs, announced the Bill back in May when it went through its first reading, saying it was time to bring the Bill into the 21st century.

IBANZ Chief Executive Melanie Gorham told the committee on Wednesday the Bill offered a significant advantage to insurers.

She questioned whether the Bill was “promoting the confident and informed participation of policyholders and others such as brokers.”

Tim Williams, a partner at Chapman Tripp, who appeared alongside Gorham, said people consulted insurance brokers to get advice.

“If it's unclear to a broker, it's going to cause confusion to consumers,” he said.

Williams also said the idea that insurance brokers could be fined and charged with an offense for failing to make a payment to be “quite unusual” and didn’t think it should be included in the Bill.

“Putting a penalty in legislation for one party not paying another party due under contract is very peculiar,” he said.

Heather Roy, the chair of Financial Advice NZ, appeared with CEO Nick Hakes and said the financial organisation was “broadly supportive” of the Bill.

Consumer contracts

However, Financial Advice NZ wants the committee to consider including all life, health and disability policies to be defined as consumer contracts.

“It's well documented that the consumers navigating insurance contracts can be complicated and time consuming. And if the process was simpler, then more families and businesses would have the adequate insurance covers they need in place,” he said.

IAG’s Executive Corporate Relations Manager Bryce Davies and Government Relations Manager Andrew Saunders represented the insurer, which supported the bill but believed several changes were necessary before it became law.

“Fundamentally, insurance is a contract, and collectively those contracts actually are the foundation of the market. And so reform of the law governing those contracts goes to the very heart of the insurance market and the economic and social role that insurance plays for New Zealand,” Davies told the committee.

He said it was important for the committee to think about both sides of the bill's purpose: making consumers feel confident about participating while also making insurers feel confident at the same time. 

“The consequences of getting that wrong or passing poorly designed reforms will simply be to add uncertainty and complexity and red tape, make implementation slower, more expensive, potentially risk greater litigation between insurers and their customers, and increase ongoing operational costs,” he said.

Bayly plans to have the Bill reported to the House by September 3rd. In a previous submission on insurance contract law reform in 2022, IAG requested insurers be given at least two years to implement the changes. IAG wants this in the new proposed Bill as well.

IAG requested insurers be given at least two years to implement the changes and the insurer wants out of this Bill as well.

Finance and Expenditure Labour member Duncan Webb – who was Commerce Minister in 2023 before the National-Act-NZ First coalition took power– questioned during Wednesday’s committee why this amount of time would be needed.

IAG’s Andrew Saunders said for insurers to meet the new obligations confidently, they need to review their questions and ensure they are appropriate, which in turn affects their products.

“The general view is that all contracts, basically insurance contracts, will need to be at least reviewed and reconsidered. The extent of change will vary, but they all need to be looked at,” he said.

He added that insurers had to be “very tight” in making sure they were asking exactly the right questions, “because they can't expect people to proffer information anymore under that duty.”

Use of genetic results criticised

Andrew Shelling, a Professor of Human Genetics at the University of Auckland, appeared before the committee to speak out against the use of genetic results in insurance coverage decisions in NZ.

Shelling is a member of Against Genetic Discrimination Aotearoa which is advocating for a law change to prevent insurers in NZ from using genetic results to deny coverage or increase premiums for applicants.

Currently, it’s legal for insurers in NZ to do this even though it has been banned in other countries like Canada.

“We see the Contracts of Insurance Bill as a unique opportunity to bring us forward and align ourselves with the rest of the world,” Shelling said.

Asked by the committee to provide a tangible “real-life” example of how this was an insurance issue, Shelling shared that his daughter had found a lump in her breast several weeks ago and is getting a biopsy. 

His wife, who is Māori, was diagnosed with lobular breast cancer eight years ago. Shelling described it as an “unusual” cancer that does run in some Māori families.

His daughter needs to get a genetic test but Shelling said she may not want to get genetic testing because of the fear of what it might do to her future ability to get insurance.

“This affects many New Zealanders,” he said.

A long time coming

Work on revising the original Insurance Contracts Bill began under the previous Labour-led government in 2019. 

In 2022, the Ministry of Business, Innovation & Employment issued an exposure draft of the updated Insurance Contracts Bill for public feedback. 

However, the Bill stalled at the consultation stage, and Labour lost the 2023 election before it could progress further.

Bayly told he was unsure why the previous Labour government sat on insurance law reform for so long.

“The insurance industry is so important to New Zealanders, both at a personal level but also from a business perspective,” he said.

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