By David Hargreaves
The Reserve Bank's come out with some surprisingly strong words of warning for insurance companies, saying the overall level of compliance with disclosure rules is not good enough and the insurers have been told in as many words that they have to "up their game".
The RBNZ on Thursday released results of a recent survey it conducted with a sample of 36 of the 89 licensed insurers.
This found that the overall level of compliance with disclosure rules was well short of minimum requirements, with 53% of respondents complying at a low or poor level, and only 22% performing relatively well but with room to improve further. Only three insurers demonstrated an excellent level of compliance.
"The level of compliance was generally disappointing and needs to markedly improve," the RBNZ said.
"Insurers that performed the worst have been provided with specific feedback and asked to provide a written response on the issues identified.
"Other insurers have been informed of their assessment and urged to refer to this report to identify improvements that can be made. The Reserve Bank will undertake further assessment of compliance with disclosure obligations to ensure that standards improve and compliance obligations are being met."
Reserve Bank Deputy Governor Grant Spencer said while the central bank couldn't necessarily extrapolate the results of the survey to all insurers, "the results were very disappointing".
"Compliance with disclosure obligations needs to improve.”
Spencer did stress that the survey should not be read as indicating underlying viability issues.
The RBNZ report shows that the most common issues found were:
- insurers not meeting their legal requirements to disclose the financial strength rating in writing prior to policyholders entering into and/or renewing a contract of insurance;
- solvency disclosure in financial statements being incomplete or incorrect;
- and website disclosures being incorrect, incomplete or not updated within the required timeframe.
"Compliance with disclosure requirements is a key component of the Reserve Bank’s prudential framework, which emphasises market discipline in addition to regulatory and self-discipline," Spencer said.
Insurers have been told to improve and those who rated poor and low must report back to the Reserve Bank on improvements made. The Reserve Bank will undertake further assessment of compliance with disclosure obligations.
“We need to see a marked improvement in compliance across the industry, and with some urgency,” Spencer said.