Insurers: Consumer NZ should give us a fair go

Monday, 24 June 2019

Insurers have hit back at a Consumer NZ report that claimed New Zealanders are not getting a fair deal from the industry.

The Consumer NZ research found only 13 per cent of people were confident the industry could be trusted. Only 8 per cent thought insurers always offered fair terms and just 18 per cent said they fully understood their insurance policies. One in four people had had a problem with an insurer, and that was most often related to a claim having been declined.

Chief executive Sue Chetwin said it showed change was needed.

She said insurers should have to provide a one-page policy summary to make it easier for consumers to understand.

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Insurance should be subject to the Fair Trading Act's ban on unfair terms, Chetwin said.

Insurers should also not be able to decline a claim when a customer accidentally or innocently did not disclose information, and should be required to provide clear information about costs and premium increases.

Complaints schemes should 'name and shame' companies that were not acting fairly, she said.

Have you had an experience with an insurance company lately? Email susan.edmunds@stuff.co.nz

But Tim Grafton, chief executive of the Insurance Council, which represents general insurers, said Consumer NZ needed to acknowledge the 'good work' that was being done by the sector.

He said his organisation's members had agreed voluntarily not to decline claims unreasonably.

'Consumer NZ also criticises us for consumers not being able to fully understand their policies but then advocates for a one-page summary. It's not possible to communicate the content of an entire policy on one page. If it were, insurers would already do it. We can do better to communicate and simplify - we accept that - but a one-page summary hardly qualifies as providing a full understanding of what is in a policy,' he said.

'The challenge we face with insurance is that it is unique among consumer products. It's something you pay for but hope never to have to use, unlike a car or an internet connection. It works because the majority of people pay for the misfortunes of the few, and each of those misfortunes comes with highly personalised circumstances. That's the conundrum insurers face: most people seldom claim.'

But he said more than 90 per cent of claims were paid and most that were not were withdrawn because they were for less than the policy excess or outside the scope of the policy, or because people did not want to lose a no-claims bonus.

He said, while the industry had a way to go, 'Consumer NZ should be fair about it'.

The report also found that people who used an adviser or broker were more likely to think they had not had a good deal.

Just 28 per cent of those who bought life insurance through a broker were happy with the customer support provided, compared with 44 per cent who bought direct from an insurance company.

Katrina Shanks, chief executive of Financial Advice NZ, which represents financial advisers, said that was disappointing.

 'Ensuring individuals and families have the right protection in place for the what-ifs in life is crucial for the financial security of New Zealanders. And to achieve this, we need to build public confidence the sector.

'We expect that the changes to the regulatory regime and the proactive steps taken already by the industry will have a positive impact on increasing consumer confidence'.

'Financial Advice New Zealand and our members are committed to continually addressing any areas for improvement and will take on board the feedback from the Consumer NZ report.'