Major makeover proposed for Life Insurance Act
Sweeping new changes to the regulation of life insurance firms are proposed in the Law Commission’s review of the Life Insurance Act.
Thursday, January 22nd 2004, 7:10AM
The review was set up by Commerce Minister Lianne Dalziel after widespread concern that the current Life Insurance Act is out of date. Passed in 1908, many of its measures assume the market is still dominated by mutual societies.Under the current law disclosure of financial statements is only required to potential holders of savings policies, as distinct from risk only policies, and even then only on request.
There is no obligation for life insurers to have credit ratings, or to provide simplified financial statements for potential and existing policy holders.
Many of the recommendations boil down to extending the financial disclosure regime for other financial services to life insurance.
Among the suggestions in the commission’s discussion document are:
- A separate government regulator for supervising financial safety of life insurers operating in New Zealand, or extending the powers of the Government Actuary, the Securities Commission, Reserve Bank or Registrar of Companies to carry out such a role;
- Increasing the bond paid to the Public Trust from the present $500,000 to $5 million;
- Making a credit rating mandatory (at present all insurers who are members of the Investment Savings and Insurance Association voluntarily get a rating);
- A requirement that all life companies get an independent trustee and a trust deed for life policies, with the trustee to act as a prudential supervisor on behalf of policyholders (similar to the current requirement for superannuation schemes);
- An “appointed actuary” regime similar to that of Australia and the United Kingdom, to ensure actuarial standards are kept and to act as a “whistleblower” if they are not;
- Greater powers of inspection for the Government Actuary or another regulator to investigate life insurers.
A key issue for any law changes will be making them fit within the Closer Economic Relations framework with Australia, especially as the New Zealand insurance market is dominated by Australian companies.
The discussion document is available from the commission and also at their website
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