Consumers still expect too much from insurance

Thursday, 17 May 2018

Twenty years as Insurance and Financial Services Ombudsman (IFSO) has confirmed to Karen Stevens that there's still a lot that New Zealanders need to learn about insurance.

The former lawyer started in the disputes resolution role in 1998 when the scheme had 58 insurance participants.

Two decades on, the scheme has 4000 from across the financial services industry. It deals with about 11 inquiries a day from consumers, the bulk of which still relate to insurance.

While membership of the scheme was voluntary when Stevens first began - and insurers threatened to withdraw when they weren't happy with its service - legislation changed that in 2010.

Now, any financial services provider registered on the Financial Services Providers Register must be a member of a third-party disputes resolution scheme.

Stevens' scheme is one of those options, alongside Financial Services Complaints Ltd, Financial Dispute Resolution and the Banking Ombudsman.

Stevens said most IFSO complaints related to settlement methods or options offered by insurance companies, followed by delays, uninsured third-party issues and excess questions.

She said many of the issues raised with the scheme were the same year after year.

'There's still a huge gap in financial literacy. We see consumers who have taken out insurance with no idea what they are covered for.'

Policy documents had improved, she said, with more 'plain English' wording.

But people still expected their insurance to cover them for anything unexpected, and were surprised when it wouldn't.

'I would have hoped that by now, with all that we do in the consumer space, financial literacy education, talking to people… they would be better equipped to make confident choices about the product they buy.'

Too few people even read policy documents , she said.

But she said it was rewarding when the scheme could help find an outcome that both parties were pleased with.

Sometimes that meant finding a solution to a dispute that had been stuck for a long time.

Other times it just meant achieving a broad level of satisfaction for consumers that, even if they were not getting their desired outcome, they understood the process and felt it fair.

'What we do is a very worthwhile thing to do. We are independent and impartial - not a consumer advocate but we do have the ability to bring about change. It's been a very good and very interesting 20 years.'

Stevens said she expected things to change more, and faster, over the next 20 years as the effect of technology was felt on the financial services sector.

She has lobbied for a change to the Insurance Contracts Act, including the need to remedy issues around non-disclosure. At the moment, New Zealand insurers can avoid paying out a policy if a customer has not disclosed something deemed to be important.

She said our rules should be brought in line with Australia and the UK's, where they could only skip a payout if they could show it was deliberate.

'We are still getting a lot of cases based on non-disclosure and if we are getting them there must be exponentially more that we never see.'

That review was announced this year.