Proposed Insurance Contracts Bill seeks to transform insurance landscape
Proposed Insurance Contracts Bill seeks to transform insurance landscape | Insurance Business New Zealand
Insurance News
Proposed Insurance Contracts Bill seeks to transform insurance landscape
Policyholders expected to benefit from reform
Insurance News
By
Roxanne Libatique
A significant legislative proposal – the Insurance Contracts Bill – was unveiled last week by Christchurch Central MP Duncan Webb, marking a potential turning point for the insurance industry in New Zealand.
The bill aims to update the country’s insurance laws, introducing measures to enhance transparency and fairness for policyholders.
What is the Insurance Contract Bill?
The proposed bill focuses on making insurance contract terms both understandable and equitable, addressing the issue of policyholders being penalised for unintentional errors. Additionally, it seeks to impose sanctions on insurance firms that fail to demonstrate good faith, for instance, by delaying claim resolutions.
“As a former insurance lawyer, I know from bitter experience that the current law did not serve consumers,” Webb said. “This Insurance Contracts Bill will require insurance contract terms to be both clear and fair.”
Webb pointed out the widespread issue of consumers not fully grasping their insurance policy terms, leading to misrepresentations of risk. The bill advocates for the simplification of policy language to aid consumers in making informed decisions about their insurance coverage.
“Consumers would be expected to take reasonable care and not misrepresent risk; however, it is often the case that they don’t fully understand the terms of their insurance policies,” he said.
The bill also proposes revisions to the regulation of non-consumer contracts, especially those involving businesses, to ensure accurate risk representation by policyholders and to offer more balanced solutions for inaccuracies in risk disclosure.
Limitations of Fair Trading Act 1986
The initiative is a response to longstanding concerns voiced by both industry stakeholders and consumer advocates regarding the need for reform.
Webb criticised the existing limitations within the Fair Trading Act 1986, specifically the exemptions related to insurance that afford less protection to policyholders. The new bill aims to eliminate most of these exemptions, keeping only those that align with overarching legal principles, and to rectify various technical issues in insurance law.
Highlighting the critical role of effective insurance law in managing the impact of unexpected events, including those exacerbated by climate change, Webb stressed the urgency of the reforms.
“Effective insurance law is essential for a well-functioning market to cope with unforeseen events. Given what we have seen with recent and increasing major events as a result of climate change, these changes can’t come quick enough,” he said. “The bill builds on existing government work, and I am optimistic the government will support it.”
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