The Minister of Commerce and Consumer Affairs says a number of life insurers still need to lift their game after an underwhelming response to the Reserve Bank of NZ (RBNZ) and Financial Markets Authority (FMA) conduct and culture review.
Earlier this year, the review highlighted a culture that prioritises sales over customer interests. The FMA and RBNZ then asked 16 life insurers to provide work plans that would demonstrate the steps they would take to improve processes, governance and monitoring of conduct risk.
“Disappointingly, in many cases the responses from some life insurers show slow and inadequate progress, and I share the regulators’ concern,” Kris Faafoi said.
“Many of the plans life insurers provided to the RBNZ and FMA for improving their internal systems were poorly expressed and incomplete.
“Some life insurance companies also appeared to be trying to ‘pass the buck’ to the brokers and advisors they use to sell their products.
“I do acknowledge that some life insurers have made commitments to address issues, and are moving in the right direction. However, overall the industry still has work to do.
“I want insurance providers to understand that they remain responsible for the quality and appropriate design of the products they sell, whether directly or through contracted agents, to ensure those policies fit customers’ needs,” Kris Faafoi said.
Mr Faafoi added that the Government had been working to fast-track measures to improve conduct in the financial sector, and will announce action on this shortly.
“We know the wider financial services sector – including both banks and insurers – hasn’t been putting customer interests top of mind. Sales incentives are a big part of the problem. Incentives play a useful role in some cases and we don’t want to remove them entirely. But when insurers sell financial products and services, the focus needs to be on the customer and not just on profit.
“We plan to introduce a regime where banks and insurers are primarily focused on their customers.
“I thank the RBNZ and FMA for their continued efforts to ensure there is improvement in conduct and culture right across the life insurance industry,” Minister Faafoi said