• An update at year end

As the year draws to a close there are several government reviews in progress which have the potential to significantly impact IBANZ Members.  We can summarise the current status of these exercises as follows:

 

Financial Services Legislation

This legislation has been enacted hand will come fully into effect in June 2020.  There is a safe harbour extension of two years for advisors to become qualified.  Still to be finalised are regulations on disclosure.

IBANZ submitted on disclosure, copy available here.  MBIE advise they are currently working through the issues we raised and have commented as follows:

  • Duplication – agree there is duplication in the requirements and will look at removing these
  • Website disclosure – agree there is an opportunity to increase what can be disclosed on websites
  • Merging of disclosures – reluctant to reduce the number of disclosures; MBIE believe this will lead to single large documents which will be confusing for consumers they are unlikely to read
  • Record keeping – now that the FMA have confirmed their standard conditions MBIE will look aligning the regulations
  • Transitional period – as the regulations will not be finalised until early next year MBIE agree a transitional period is needed.  They are considering what is an appropriate period

 

Fire and Emergency NZ

Public consultation meetings have been concluded with submissions on possible funding regimes due on 5th February 2020.  This is the first phase of a “back to first principles” review, although not completely as full Government funding of FENZ is off the table.

There are a number of common issues being raised.  Simplicity is a key aspect and the Department of Internal Affairs (DIA) acknowledge this is something that the existing proposals lack.

Basing the levy on the benefit FENZ provides to the levy payer has been debated as to what is meant by “benefit”.  One of the issues is that while a property may never benefit from FENZ directly, they would benefit by having the resource available.  DIA say the biggest cost for FENZ is not attending incidents but maintaining sufficient resources around the country.

A common question has been why the ACC is not contributing to the funding given the increasing number of medical incidents being dealt with by FENZ.  DIA acknowledge they had not looked at that option but will do so.

If the insurance option is selected in this first phase the main task will be to resolve the complexity issues.  A stepped approach to moving away from insurance is a possible option.  An easy first step would be to move the motor vehicle levy onto the NZTA registration process.

 

Conduct of Financial Institutions

We recently arranged an urgent meeting with Minister Kris Faafoi to discuss the potential under the proposed legislation to duplicate obligations brokers already have under financial adviser legislation.  This could well result in excessive compliance costs and confusion between obligations under different pieces of legislation. 

 

The Minister had indicated in his Cabinet Paper to MBIE that financial advisers should be exempt so it is unfortunate MBIE have ignored this condition.  Submissions will be called for in the New Year and IBANZ will be responding on this issue. 

 

Insurance Contract Law

Details of what is proposed were recently released by Commerce Minister Kris Faafoi.  Clearly there is a consumer focus e.g. on disclosure by the insured and the response by insurers to non-disclosure. 

Much of what is being looked at reflects overseas jurisdictions, in particular what has been introduced in the UK.  We are expecting an options paper will be released in the New Year seeking submissions on how to update insurance law.

 

Credit Contracts and Consumer Finance Act

Regulations associated with a recent amendment to this legislation raises issues for premium funding in general insurance.  Affordable lending is the issue with proposed regulations requiring the collection of wide ranging financial details from clients.  This will result in serious challenges to premium funders having to establish the financial position of a client and the affordability of funding. 

Ironically funding is a way of making premiums more affordable.  It is worth noting insurers charging monthly premiums are not caught by the regulations.  At least one funder has indicated they are looking at pulling out of the domestic insurance market.

IBANZ is meeting with all premium funding stakeholders to discuss an industry approach to government on this matter.