In the ever-evolving landscape of insurance and financial services in New Zealand, the Insurance Brokers Association of New Zealand (IBANZ) plays a pivotal role in defending its members’ interests through making submissions on draft legislation. These submissions are not mere formalities; they are carefully crafted documents that advocate for fair, balanced, efficient and effective laws and regulations for the benefit of insurance brokers, their clients and the rest of the insurance industry.
The Importance of submitting on draft legislation
Draft legislation in the insurance sector can significantly impact brokers and their clients if the industry’s expertise and knowledge are not introduced into the consultation process. When a new bill or amendment is proposed, IBANZ reviews the draft carefully to identify provisions that may affect insurance brokers and their clients. The primary aim is to ensure that the legislation is fair, practical, efficient and does not impose undue burdens on insurance brokers, their clients or insurers.
IBANZ's submissions are often driven by its deep understanding of the complex and dynamic insurance industry. IBANZ gathers insights into the potential impacts of the proposed legislation from the considerable industry knowledge and experience of the IBANZ board, its regulatory affairs committee and the Chief Executive, Mel Gorham. This collaborative approach ensures that the submissions are comprehensive, professional and well-developed in a centralised, cost-efficient manner for the industry.
Advocacy and Representation
One of the core benefits of IBANZ's involvement in the legislative process is advocacy for improvements for all industry participants. Unnecessary increased costs penalise clients when they are passed on, are detrimental to society through promoting under-insurance and greater dependence on the public safety net, are averse to insurers and brokers through the burden of internalised costs and reduced access to independent advice and policy take-ups. IBANZ advocacy ensures that the knowledge and experience of insurance brokers is shared with policymakers in a forum where it has been sought, is welcomed and is respected.
Policymakers often lack the on-the-ground experience that brokers possess. IBANZ bridges this gap by providing detailed, practical feedback that highlights the real-world implications of proposed laws. This feedback is crucial in shaping legislation that is both effective and implementable.
Influencing Policy Outcomes
By actively participating in the legislative process, IBANZ has had a tangible influence on policy outcomes. Policymakers value the insights provided by industry experts, and IBANZ's well-reasoned arguments often lead to amendments in the draft legislation.
This influence is a testament to IBANZ's credibility and the collective knowledge and expertise of those who contribute. IBANZ’s proactive approach not only benefits brokers but also enhances consumer protection and market stability.
In the last five years, IBANZ has submitted on a large number of consultations, including:
• the Contracts of Insurance Act (CoIA), its predecessor bills and consultation documents;
• the Financial Markets (Conduct of Institutions) Amendment Act (CoFI), its Regulations, the Treatment of Intermediaries and other discussion documents;
• various topics relating to the Natural Hazards Insurance Act (previously EQC);
• the Financial Markets Conduct (Regulated Financial Advice Disclosure) amendment Regulations;
• the FMA’s Fair Outcomes for Consumers and Markets paper;
• the FMA’s Intermediated Distribution Guidance;
• the Insurance (Prudential Supervision) Act options papers; and
• the new Fire and Emergency New Zealand levy regime.
Changes have been made to draft legislation or the FMA’s policy settings that appear to have resulted, at least in part but often solely, from IBANZ’s submissions. For example:
• Removing insurance brokers and other intermediaries from the requirement to have fair conduct programmes under the CoFI legislation, on the basis of the duplication with the intent and requirements of the Code of Professional Conduct for Financial Advisers;
• Removing insurance brokers and other intermediaries from most (but not all) of insurers’ monitoring and training obligations under the CoFI legislation;
• Limiting CoFI’s prohibited incentive restrictions to only apply to employees involved in advising the client, not to all employees as originally proposed and removing incentives which ‘indirectly’ refer to targets/thresholds;
• Limiting CoFI’s suitability requirement under the fair conduct principle to consumers “when viewed as a group”, rather than individually, which would have led to heightened disputes and inefficient outcomes;
• Introducing a regulations power (which will hopefully be enacted) to standardise notifications to policyholders of their CoIA disclosure duties and the applicable penalties, so insurance brokers can pass on a single disclosure document when recommending multiple insurer options to their clients;
• Limiting brokers’ and other intermediaries’ CoIA duties to pass on customer information so they apply to knowledge held by the employee working on the matter and not any information held by all employees, as was drafted. IBANZ took this matter to the Select Committee to obtain this change;
• Removing CoIA’s criminal offences for late payment by brokers to insurers of client premiums, on the basis that this was a legislative interference in a commercial arrangement;
• Grandfathering existing agreements for premium payment dates exceeding 50 days under CoIA, so existing agreements would not need to be redocumented to maintain the current arrangements;
• Changing the period for brokers paying non-consumers their claim amounts under CoIA from a hard seven days to a “reasonable time” for more flexibility;
• Specifying that brokers passing on client information to the insurer, as required by CoIA, is not contrary to brokers’ contractual duties to their client;
• Permitting, in distribution agreements, limitations on an insurance broker’s statutory liability to the insurer for not passing on client information under CoIA;
• Introducing a regulations power (which will hopefully be enacted) to allow insurance brokers to pay premium funders from their broker accounts;
• Challenging the FMA’s Fair Outcomes over-reach, which has recently been remedied by the FMA; and
• Improving the 2026 FENZ regime including:
o Reducing the non-residential property rate from 11.95c/$100 to 7.76c/$100,
o Reducing the proposed motor vehicle flat rate from $40.12 to $25.00 per vehicle,
o Adding marine vessels to exempt property, and
o Exempting from the levy classes of insurance for war and terrorism, deductible buy down, and existing property under contract works.
Submissions may not necessarily lead to changes. They can support maintaining the status quo. For example, IBANZ submitted against preventing insurance brokers’ investing their client account balances, which was being considered by the Regulators in its Contracts of Insurance Bill consultations. IBANZ also, through the submissions processes, proactively sought and obtained an exemption for premium funders from the Credit Contract and Consumer Finance Act ‘suitability and affordability’ requirements, which would have unnecessarily delayed and interfered with premium funding sales processes.
Conclusion
IBANZ's submissions on draft legislation have been instrumental in protecting the interests of IBANZ members, their clients and the insurance industry. Legislation that is unnecessarily restrictive or impractical can hinder brokers' ability to operate effectively, penalise their clients and damage the insurance industry.
By voicing concerns, suggesting modifications and influencing policy outcomes, IBANZ seeks to ensure that the final legislation is more efficient, more balanced, and supports growth and innovation in the insurance industry for the benefit of insurance brokers, their clients and other industry participants.
IBANZ appreciates the support of Tim Williams, leading lawyer and partner at Chapman Tripp, who helped with most of the submissions referred to in this article and appeared for IBANZ at Select Committees with Mel Gorham. Tim’s well-respected knowledge and experience has assisted in adding depth and credibility to the representations and submissions made by IBANZ.
