The insurance industry is generally ill-prepared and, in some cases, ignorant and indifferent to improving its conduct and treatment of customers, according to the Financial Markets Authority (FMA).
Photo: zimmytws/123RF
The authority has issued a damning report after asking 42 companies to detail what processes and systems they have in place to ensure consumers are charged correctly, have the right types of policies, and codes of conduct for staff.
FMA director of banking and insurance Clare Bolingford said some firms did not seem to be taking the issue seriously.
"Prior to our enquiries, many firms claimed they were confident no significant issues existed. But this review has revealed a number of instances of poor conduct."
The report said some insurers demonstrated that they "did not see conduct and culture as relevant to their organisation."
The survey covered companies providing house, contents, vehicle, commercial, liability, travel and health insurance.
Only two of the companies - IAG and the Medical Assurance Society - satisfied the FMA queries. Ten were seen as deficient in some regard, and 30 described as inadequate. Among the firms failing to meet the FMA's expectations were leading brands AA, AIG, FMG, nib, Southern Cross, Tower and Vero.
"Broadly, [they] have a poor understanding of, and commitment to, good conduct and culture practice," the report said.
The review showed many insurers did not actively monitor product suitability, were still selling poor value or legacy products, and had over-charged some customers.
FMA director of banking and insurance Clare Bolingford. Photo: Supplied
Bolingford said insurers needed to improve their systems to supervise what brokers were doing on their behalf, improve staff culture, and have systems for fixing problems.
The behaviour of banks, fund managers, and finance businesses have been under scrutiny by the FMA and the Reserve Bank in recent years.
The life insurance industry was harshly criticised by the regulators in 2019 for putting profits before people.
Bolingford said updated laws with a licensing regime were currently before Parliament, and they would require insurance firms to be licensed and meet standards.
"We have repeatedly made our expectations around conduct and culture clear. It is now time for the industry to take meaningful steps to improve or risk facing regulatory action," she said, adding that firms might be denied a licence if they do not comply.
Insurance Council (ICNZ) chief executive Tim Grafton, whose body included 16 of the firms surveyed, told Morning Report the industry was making progress and took fair insurance code principles seriously.
He acknowledged the findings of the report were unacceptable, bit said these did not reflect the current reality of ICNZ members.
"It's a snapshot of what was happening in October 2019 and a lot has happened since then to improve our systems and processes and we need to be meeting expectations by the time new legislation comes into effect by 2023," he said.
Grafton said trust and confidence had been affected but mistakes were being rectified, money repatriated and good practice put in place.
"There's an awful lot of good practice that does occur and I've called out over the past 12 to 18 months repatriation of premiums and a whole lot of other support issues that were extended to customers during the lockdown periods with Covid-19," he said.
The review found a small cohort of people being charged twice, that in some instances insurers have had to pay back money. He acknowledged there many be people still paying too much for their insurance, but most mistakes were minor, all were unintentional and were being fixed.
"These examples that have been found have largely been an IT challenge issue. So mistakes have been made there and mistakes do happen. These were not acceptable and they need to be remediated and insurers have been going back over the past five years and searching everything they've been doing to try to unearth any mistakes they have been unearthed.
"These aren't intentional mistakes. These have been mistakes that have occurred through human error. They're not acceptable but in any organisation they will occur. But for the vast majority of times insurers do honour commitments to all claimants."
He said any suggestion of indifference towards customers was wrong.
"We are thoroughly committed to fair insurance code principles and the way in which we've responded there. When it talks about overcharging of customers this is largely been a very small amount of money applying across the board and a lot of it has been repatriated already."
