The Financial Markets Authority’s (FMA) July 2021 report: Insurance conduct and culture: Fire and general insurers update makes it clear that it is serious about improving the conduct of insurance companies.
Fire and General insurers had 18 months to review their conduct and culture
The report covered fire and general insurers who are the providers of house, contents, vehicle, commercial, liability, travel, and health insurance. The majority of New Zealanders have one or more of these types of insurance.
Fire and general insurers were given 18 months to review their operations and provide feedback to the FMA.
Only two out of 42 insurers reviewed met the FMA’s expectations
Just two of 42 companies included in the review – IAG and the Medical Assurance Society - met the FMA’s expectations. Thirty responses were considered inadequate and 10 deficient.
These insurers failed to heed the messages about the need to improve customer outcomes. They appeared to be deaf to the findings of the Australian Royal Commission in 2017/18, the FMA and RBNZ’s Life Insurer Conduct and Culture Review in 2019.
Responses from some fire and general insurers to the FMA created the impression that they did not consider conduct and culture to be of relevance for their operations.
The FMA emphasised its strong disapproval by naming all those participating in the Review along with its findings. It took the unusual step of naming firms whose responses were inadequate with the intention of motivating insurers to prioritise improvements to their conduct, culture and customer services.
Almost all insurers failed their customers, thousands will receive refunds
Poor performance identified by the FMA centred on the failure of almost all the insurers to actively monitor product suitability for customers. The review also found evidence of overcharging and a widespread failure to provide multi-policy discounts promised to policyholders. Thousands of customers will receive refunds as a result.
Weak integrity systems within the insurers and lack of transparency were found to have enabled these poor customer outcomes.
Tone from the top was missing
The Boards of Directors of fire and general insurers were found to be uninterested in leading the changes in organisational structure required to improve their firm’s culture and to promote good conduct.
Voluntary participation in TINZ’s Online FISA Self-Assessment
There is a simple solution: the time is right for insurers to prepare to participate in the upcoming Financial Integrity System Assessment (FISA) Online Self-Assessment.
TINZ's Online FISA Self-assessment is designed to engage financial organisations - including insurers – in an internal discussion about the conduct and culture of their organisation. Following on from the reviews by the regulators, the FISA Self-Assessment is designed to deepen discussion throughout financials services firms.
A FISA Self-assessment is appropriate for organizations throughout the industry. In addition to insurers, these financial organisations include banks, financial services providers, co-operatives, business societies, and Kiwi Saver providers.
Discussion led by board chairs working with an independent facilitator
FISA is designed to engage boards, board Chairs, the Chief Executive Officers and those involved in organisational roles to self-assess the attributes of their conduct and culture throughout their operations. By doing this, they can identify ways to strengthen their integrity systems.
Ideally, the financial organisation’s Board Chair and CEO will consult within their firm to identify a trusted facilitator to lead the exercise.
Then, representatives from operations, communications, human resources, procurement, finance, risk management, procurement, along with customer services, can be identified and brought together for an hour or so to undertake the assessment.
Through leadership by the Chair and CEO, the other attendees will be encouraged by the facilitator to discuss the questions as they contribute to the completion of the online self-assessment. This can assist in shaping the culture of the organisation through actions identified in response to deficiencies raised by the self-assessment questions.
Improve customer trust
By completing the FISA Self-assessment financial services firms will build trust and confidence in New Zealand’s financial system. This will make the regulators happier. It is also an authentic and enduring way to build long-term customer loyalty.