The Reserve Bank of New Zealand (RBNZ) said yesterday that insurers' compliance with disclosure rules was generally disappointing and needed to improve urgently.
A recent survey by the RBNZ of a sample of 36 of the 89 licensed insurers found that 53% of respondents complied with the rules at a low or poor level, and only 22% performed relatively well but with room to improve further. Only three insurers demonstrated an excellent level of compliance.
RBNZ Deputy Governor Grant Spencer said “While we can’t necessarily extrapolate these results to all insurers, the results were very disappointing. Compliance with disclosure obligations needs to improve”.
The survey should not be read as indicating underlying viability issues. The report shows that the most common issues found were: insurers not meeting their legal requirements to disclose the financial strength rating in writing prior to policyholders entering into and/or renewing a contract of insurance; solvency disclosure in financial statements being incomplete or incorrect; and website disclosures being incorrect, incomplete or not updated within the required timeframe.
“Compliance with disclosure requirements is a key component of the Reserve Bank’s prudential framework, which emphasises market discipline in addition to regulatory and self-discipline,” Mr Spencer said.
Insurers have been told to improve and those who rated poor and low must report back to the RBNZ on improvements made. The central bank will undertake further assessment of compliance with disclosure obligations.
“We need to see a marked improvement in compliance across the industry, and with some urgency,” Mr Spencer said.
Several themes have been identified from the review. Small insurers, overseas insurers and insurers with more complexity performed worse – for a variety of possible reasons. For small insurers, this could be because of lack of resource and/or focus, whereas for overseas insurers this could be a lack of knowledge of the New Zealand requirements and/ or because of additional requirements around the disclosure of overseas policyholder preferences.