Do not let the unlucky submission closing date of Friday 13 July 2018 put you off having a say in the Government's review of insurance contract law.
The review is heavily consumer focused, with an emphasis on:
- the insured having certainty that insurers will respond as expected in the event of loss; and
- fairness, efficiency and transparency in dealings between the insured and insurers.
The issues paper sets out key questions to which the Minister of Commerce and Consumer Affairs is seeking answers. The questions fall under several broad topics for discussion:
- The insured's disclosure obligations and remedies for non-disclosure
- The Insurers' conduct and supervision
- Exceptions from the Fair Trading Act's unfair contract terms provisions
- Comparing and changing providers and policies
- Responsibility for intermediaries' (brokers) actions
- Repeal and reconsolidation of the six insurance law Acts
We touch on one of the discussion areas below.
Disclosure obligations and remedies for non-disclosure
The issues paper identifies several issues surrounding disclosure, including:
- Uncertainty around what the insured must disclose. The materiality test is not easy for the average consumer to understand
- Insureds may not be aware of their general duty of disclosure and insurers are not under a positive duty to bring this to their attention
- The consequences for breaching disclosure obligations are serious and can have disproportionate, long-term consequences for insureds
The Government is interested in stories from the consumer's perspective:
- Are you aware of the duty of disclosure?
- Do you have examples where the breach of duty of disclosure has led to disproportionate consequences?
- Can you accurately assess what a prudent underwriter considers to be a material risk?
Other questions, laden with policy considerations and concerns of fairness, are important for both sides to consider:
- Should the remedy available to the insurer be more proportionate to the harm suffered by the insured?
- Should unintentional non-disclosure (i.e. a mistake or ignorance) be treated differently from intentional non-disclosure (i.e. fraud)? If so, how could this practically be done?
- Should non-disclosure be treated differently from misrepresentation?
There is mood for change to reduce the complexity of insurance
generally in New Zealand, and to improve the experiences of
consumers. The industry may become more regulated, especially
around the consequences of non-disclosure and what constitutes
Both consumers and insurers alike need to engage with the consultation process so any new regime is workable and fair on the one hand, without driving up the cost of insurance for consumers on the other.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.