The Contracts of Insurance Bill was given its first reading this week
The government has unveiled plans to modernise insurance law to enhance protection for New Zealanders and offer security in disaster situations.
“These reforms are long overdue. New Zealand’s insurance law is complicated and dated, some of which is more than 100 years old. The recent extreme weather events show just how important a well-functioning insurance system is and it’s about time we brought insurance law into the 21st century”, Commerce and Consumer Affairs Minister Andrew Bayly said.
The Contracts of Insurance Bill was given its first reading on 2 May. The legislation is designed to simplify the insurance system and offer assurance to policyholders who regularly pay their premiums that they can can expect timely and fair compensation when disasters occur.
“We have all heard stories of people being denied compensation because they didn’t realise they had to disclose certain information, or waiting months on end in limbo while they wait for a decision from their insurer. This isn’t fair or right," Bayly said. “The bill makes a really positive change for consumers by shifting the onus of disclosure duties to insurers. Right now, consumers must disclose everything that might be relevant to an insurance policy. But it’s difficult for everyday Kiwis to know what information is relevant”.
He added that the bill would put the burden on insurers to ask consumers the right questions in order to obtain relevant information for a policy, which would “reduce insurers’ ability to void cover or refuse to pay claims”.
The legislation would also mandate that insurance policies be written with simple terminology and that claims are paid within a reasonable period.
“I have consulted with industry to make sure this bill balances customer protection with providing certainty for the market. In a cost-of-living crisis, we are acutely aware of the need to keep insurance premiums to a minimum”, Bayly said. “This bill moderates the cost of insurance by maintaining things that are working well. The last thing I want is to introduce risk and uncertainty, which would drive up insurance premiums and ultimately harm everyday Kiwis.”
He explained that maintaining a secure insurance market was critical to the country's economic stability, and confirmed that he intended to pass the bill this year. The passing of the legislation is subject to the Select Committee process and submissions from the public.
