Regulation

 

The insurance industry in New Zealand, compared to many other countries like Australia and the United States of America, is relatively unregulated in the insurance industry. But there is significant regulation that needs to be considered. These regulations can be in the form of Acts of Parliament, or industry agreements. 
 
Acts of Parliament can be divided into two general categories:
 
(1)       Regulation of insurance companies – who can open an insurance company, how it must operate and technical matters such as solvency;
 
(2)       Regulation of the conduct of insurance companies in relation to claims and policies.
 
Insurance Companies
There are a number of Acts governing insurance companies. These include the Insurance Companies’ (Ratings and Inspections) Act 1994, Insurance Companies’ Deposits Act 1953, Insurance Intermediaries Act 1994 and the Life Insurance Act 1908. These Acts govern the circumstances in which an insurance company and an insurance broker must carry out its business, such as paying deposits, obtaining financial and claims paying ratings and conduct of its business. 
 
In New Zealand, insurance companies don’t need to register or obtain a licence to practice. But they do need to pay a deposit, and in most cases, obtain a formal claims paying rating from an approved agency. All of these obligations are set out in the legislation referred to above.
 
Claims and Policies
There are two very important pieces of legislation – the Insurance Law Reform Act 1977 and the Insurance Law Reform Act 1985. These Acts govern the conduct of insurance companies in relation to many aspects of claims and policies. By in large, these Acts have been passed to prevent insurance companies from acting unreasonably. Some common examples are:
 
·        Section 11 – Insurance Law Reform Act 1977 places strict limitations on the circumstances on which an insurance company can enforce an exclusion. Insurance companies cannot decline a claim in reliance on an exclusion if the insured person can prove that the circumstances falling within the exclusion did not cause or contribute to the loss;
·        Sections 5 & 6 – Insurance Law Reform Act 1977 limit the circumstances in which an insurance company can avoid a policy on the basis of a misstatement of the application or renewal;
·        Section 9 – Insurance Law Reform Act 1977 limits the circumstances in which an insurance company can decline a claim for late notice;
·        Sections 6 & 7 - Insurance Law Reform Act 1985 limit the circumstances in which insurance companies can refuse to pay a claim on the grounds of what is called “insurable interest”’;
·        Section 66 - Insurance Law Reform Act 1985 places restrictions on the sale of life insurance to minors. 
 
In addition to legislation, the Fair Insurance Code, administered by the Insurance Council, places obligations on the insurance company to conduct itself in a fair and reasonable manner both in relation to insurance applications, policies and claims. A copy of the Fair Insurance Code can be found at the website of the Insurance Council of New Zealand – http://www.icnz.org.nz/regulation/fair-insurance.php. The Fair Insurance Code, that binds all members of the Insurance Council places responsibilities on members to:
 
·        Act fairly and openly in all dealings with their customers meaning that they will:
-          Answers questions accurately, explain information you need to give us when you apply for insurance, renew the policy or make a claim;
-          Explain the importance of giving us information that is complete up to date and relevant;
-          Give the client or the broker a copy of the policy;
·        Give information about the best policies available, provide help when requested to understand the terms conditions and exclusions of the policy;
·        In relation to claims:
-          Explain how to make a claim, explain what information must be given;
-          Explain the steps that would be taken while handling the claim;
-          Tell the client of their obligation to give accurate and honest information;
-          Train staff properly.
 
The Fair Insurance Code is a very helpful document that binds members of the Insurance Council, and can form the basis of a civil claim against a member of the Insurance Council. The Insurance Council itself cannot actually order an insurance company to pay a claim, and it must be remembered that the Insurance Council is an organisation run by insurance companies. Its stated objectives are to “represent fire and general insurers”.
 
In the health insurance area, the Health Funds Association of New Zealand is an industry body. Again, it is a voluntary organisation. But members agree to be bound by a formal code of practice. This code of practice can be found at the website of the Health Funds Association at www.healthfunds.org.nz. Like the Fair Insurance Code for fire and general insurance, the Health Funds Association Code of Practice binds all members, and governs the practice of health insurers in their dealings with clients, marketing and claims. Whilst the Health Funds Association does not have the ability to actually enforce the code, it could form the basis of a civil claim against a member organisation.
 
In the Life Insurance Area, the Investments Savings and Insurance Association (ISI) provides a similar role. Like the Insurance Council of New Zealand the Health Funds Association, it is an industry run organization. But members are bound by a Code of Ethics and Conducts standard, and so member organisations can in a civil case be held accountable. This code can be found at www.isi.org.nz.
 
When considering any of these three organisations, it is important to remember that they are industry organisations, and run by members of the industry. The boards of most of these organisations are senior executives of the insurance companies. They do provide a valuable source of information, but do not have any legal teeth in themselves.
 
However, it is important that these industry organisations walk the talk as well as talking the talk. These websites are a goldmine of promises and assurances that are made by the organisations on behalf of their members. Whilst the organisations do not have a specific ability to enforce the Code of Practice (apart from excluding a member organisations) these codes of practice can be relied upon in civil proceedings where the member organisation is involved.
What is insurance Insurable Interest Utmost Good Faith Duty of Disclosure Reasonable Care Regulation Insurance Claims Register Insurance and Savings Ombudsman Applying for Insurance Making a Claim Expiry & Renewal