A government review of practices in the life insurance sector could have implications for automotive insurers.
The review, commissioned by the Financial Markets Authority and Reserve Bank, found life insurance sales were prioritised over customer interests.
The report found “given the similarities between life and non-life insurance, it is possible that the vulnerabilities identified in this report may exist across the broader insurance industry”.
And commerce and consumer affairs minister Kris Faafoi has vowed Cabinet will “get rid of sales incentives in the insurance industry that are driving behaviour that is not in the best interest of consumers”.
Financial Services Federation executive director Lyn McMorran, whose organisation represents many automotive financiers and insurers, but no life insurers, says all companies that operate in the F&I space should take note of the report’s findings.
“We do have credit-related insurance providers as members so the findings of the review should be considered by them and indeed all other sectors of the financial services industry, and any customer-based industry to ensure their conduct is ethical with a focus on good outcomes for consumers.
Credit-related insurance is an essential part of responsible lending, helping consumers avoid debt if unforeseen circumstances arise, McMorran says.
And she’s confident it’s being sold responsibly by her members.
“The FSF’s credit-related insurance members developed a Responsible Credit-Related Insurance Code which was released in June 2017 which describes the benefits of such products to consumers and how these products should be provided to them responsibly.
“We support ministers Faafoi and Robertson in their efforts to introduce legislation that will better protect customers in the life insurance area, but like with any legislative change it will only be effective if it is sufficiently enforced.”
