The thematic review by New Zealand’s Financial Markets Authority (FMA) on replacement business practices in the insurance industry has several important findings for the sector, the Financial Services Council (FSC) said.
“We commend the FMA for the active role it is taking in carrying out these thematic reviews and setting out clear expectations in regards to industry conduct,” said FSC chief executive Richard Klipin.
“We don’t shy away from the fact that the findings of the review are mixed and that there is a clear challenge from the FMA for the industry to improve practices related to replacement insurance transactions.”
Klipin said the review found a range of different behaviours “from good to bad,” but the FSC and its members were committed to working with the FMA to lift industry practice in this area across the board.
“As the FMA notes, the priority must be ensuring good outcomes for customers, yet it appears when it comes to processes and practices around replacement business this has not always been the case,” he said.
“As an industry we acknowledge this and are working hard to ensure our policies are driving the best outcomes for clients.”
Klipin said the sector is going through a significant period of change relating to conduct, with the progress of the Financial Services Legislation Amendment Bill and the Financial Advice Code Working Group, which the FSC strongly supports.
“Industry leadership and self-regulation also has an important role to play in lifting standards within the sector. To this end the FSC board after an exhaustive two-year process has this month signed off on an inaugural FSC Code of Conduct which will be launched in September,” Klipin said.
“The role of insurance is ultimately to manage risk and to ensure that consumers get the right cover and the right advice.
“This can be done through a range of commercial models, but in all cases it is vital that robust processes and policies are in place to ensure that customer interests are at the centre and any conflicts of interest are properly managed.”