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Insurance reform is on the way: What it means for businesses

On 2 May 2024, the Government announced that current NZ insurance law will be updated.
4min read

Every business owner will be familiar with the challenges of choosing and managing insurance policies. Risk is a part of the everyday, and that includes making sure your business is sufficiently covered financially.

On 2 May 2024, the Government announced that current NZ insurance law will be modernised and improved, to enable consumers and businesses to effectively protect themselves against risk.

Commerce and Consumer Affairs Minister, Andrew Bayly, explained in a press release:

“These reforms are long overdue. New Zealand’s insurance law is complicated and dated, some of which is more than 100 years old. The recent extreme weather events show just how important a well-functioning insurance system is and it’s about time we brought insurance law into the 21st century.” 

The changes have been set out in the Contracts of Insurance Bill, and this Bill is expected to be passed by the end of this year. We’re here to take you through what you can expect.

What changes have been proposed?

The planned reforms have been in the making for a while now. They were initially introduced in November 2019, with the then-Labour and NZ First coalition government in charge, although no changes were made at the time. The reforms were brought back into consideration in April 2024 by the current government.

The raft of changes, according to the Government, are to ensure the following:

  • That responsibility falls on insurers to ask consumers the right questions when processing new insurance policies, rather than leaving it to consumers to provide information.
  • That insurance policies are written and presented clearly for consumers.
  • That insurers respond proportionately when customers have misrepresented themselves, or failed to disclose something they should have.
  • That insurance-specific exceptions from the unfair contract terms provisions in the Fair Trading Act 1986 are removed, and instead there is clarification on which insurance terms are part of the “main subject matter” of the contract.
  • That there is a set definition of a “reasonable” period of time during which an insurer must pay out on claims.
  • That the Financial Markets Authority will have increased powers to monitor and enforce compliance with new requirements.

The changes themselves are numerous and detailed, but all follow the principles above in their approach. For example, there are a list of factors that will be considered to define what a “reasonable” period of time looks like for different insurance claims.

Likewise, insurers have additional legal compliance to consider through these changes, and will have new rules to follow when they deem that a consumer has provided insufficient information.

What will they mean for businesses?

For businesses, these reforms could be a positive change. They will have additional rights when it comes to the insurer/consumer relationship and they could potentially gain more clarity into the policies they hold. They could also see better timeframes with regards to the speed of payouts.

Of course, that all does depend on the insurers that businesses work with. Fair insurers who operate in good faith are likely to follow a lot of the aforementioned principles already. However, these reforms may keep the ones who don’t in check. For any business owner who has had a negative experience with their insurance provider, they’ll be hoping that these changes make a difference in the future.

When will these changes take effect?

The Contracts of Insurance Bill had its first reading on 2 May 2024, and is likely to pass by the end of 2024. To be passed, it still has to go through a select committee, a second reading, a committee of the whole House, a third reading and then finally receive Royal Assent.

Employment Hero is here to help employers

We know just how hectic it can be when you’re running a business. Organising and managing comprehensive insurance is just one of many responsibilities you hold, especially if you’re managing people, payroll and recruitment in-house.

Employment Hero is designed to support employers so that they can get more time back in their day. Our innovative system helps with all aspects of HR and payroll, from finding top talent to automating payroll and supporting compliance.

To find out more about how Employment Hero can support your business, book a call with one of our team today.

Jen Denny
Content Marketing Specialist - Employment Hero
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