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Thematic review of life insurer conduct and culture

In 2019, we released the findings of our joint review with the Financial Markets Authority of 16 New Zealand life insurers that underwrite life insurance products. This page discusses the findings of the review and next steps. 

What the review found

The review found extensive weaknesses in life insurers’ systems and controls. This included weak governance and management of conduct risks across the sector and a lack of focus on good customer outcomes.

Other key findings of the review were:

  • limited evidence of products being designed and sold with good customer outcomes in mind
  • some insurers did little or nothing to assess a product’s ongoing suitability for customers
  • structures for sales incentives risk sales being given priority over good customer outcomes
  • where sales were through an intermediary, there was a serious lack of insurer oversight and responsibility for the sales and advice, and customer outcomes
  • remediation of conduct issues is generally very poor, with insurers slow to respond to issues and in some cases not sufficiently remediating them.

While the review did not find widespread cases of misconduct by life insurance companies, it did find several instances of poor conduct. There were also a small number of cases of potential misconduct (that is breaches of the law), which have been investigated by the appropriate regulator.

Some of the issues and themes are similar to those highlighted in the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (ARC), although on a smaller scale. The joint regulators (the Reserve Bank of New Zealand and the Financial Markets Authority) are not confident insurers are aware of all the current issues. This creates a serious risk of more conduct issues arising.

Next steps

The 16 life insurers received individual feedback and had to report back to us and the Financial Market Authority by 30 June 2019.

The insurers had to provide an action plan that the regulators would review, including how they would address incentives based on sales volumes for internal staff and commissions for intermediaries. They were also required to report regularly on progress and implementation of their action plan.

Full details are provided on page 7 of the review report:

Note that the report is based on a thematic monitoring review where information was provided voluntarily by insurers. It is not appropriate to name or attribute findings to any individual businesses.

Doing the right thing for customers

Buying life insurance is one of the most important financial decisions people will make. Customers should be able to have confidence their insurance will do what the insurance company or their financial adviser has told them. Many customers do experience the benefits of their insurance policies every year.

A positive finding in the report showed that, in general, frontline claims teams were focused on good outcomes with a strong desire to do the right thing for their customers.

The purpose of the thematic review and the report’s recommendations are to ensure the industry responds with urgency to the issues identified.

More information for consumers can be found on the FMA's website