New Zealand Law Society - Reserve Bank report finds poor insurance disclosure compliance levels

Reserve Bank report finds poor insurance disclosure compliance levels

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A Reserve Bank report on compliance by licensed insurers with disclosure rules has found that the overall level of compliance is well short of the standard required, with 53% of participants complying at a Low or Poor level.

The report, Licensed Insurer Compliance with Financial Strength Rating and Solvency Disclosures, is based on a survey the bank conducted from February to June 2017 with a sample of 36 of 89 licensed insurers.

The bank says only 22% of the sample performed relatively well, "ranking good overall, but with some room to improve further. In this group, only three insurers demonstrated excellent compliance."

The most common issues were around not meeting the 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.

The bank says the review has identified several themes. Small insurers, overseas insurers and insurers with more complexity performed worse.

This was for a variety of reasons. The report says it could be because of lack of resource and/or focus for small insurers, while it could be a lack of knowledge of New Zealand requirements for overseas insurers.

"The level of compliance was generally disappointing and needs to markedly improve," the bank says. "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."